We intend to continue to protect our proprietary technology through patents, copyrights and trade secrets. Despite this intention, we may not be successful in achieving adequate protection. Claims allowed on any of our patents may not be sufficiently broad to protect our technology. Patents issued to us also may be challenged, invalidated or circumvented. Finally, our competitors may develop similar technology independently.
competing technologies. If any of these events occur, our competitive position could be adversely affected.
other intellectual property disputes, which could require us to spend a significant sum to defend and could cause losses.
stage of the proceedings, we do not have an estimate of the likelihood or the amount of any potential exposure to us. [Removed and Reserved] 2009: First Quarter Second Quarter Third Quarter Fourth Quarter 2008: First Quarter Second Quarter Third Quarter Fourth Quarter 2010. STATEMENT OF OPERATIONS DATA: Revenue Costs and expenses: Cost of products sold Research and development (1) Selling, general and administrative Impairment loss on goodwill Amortization of intangible assets (1) Restructuring charges Loss from operations Other income (expense), net (Loss) income before provision for income taxes Provision for income taxes Net (loss) income Basic net (loss) income per share Diluted net (loss) income per share Shares used in per share calculations: Basic Diluted BALANCE SHEET DATA: Cash, cash equivalents and Short-term marketable securities Total assets Convertible notes Stockholders’ equity of our revenue in fiscal 2010 Revenue Gross margin Research and development Selling, general and administrative Impairment loss on goodwill Amortization of intangible assets Restructuring charges Loss from operations $297.8 million as compared to $194.4 million in fiscal 2009. Revenue increased across all product lines, end markets, and product classifications. Revenue in fiscal 2009 decreased to our new products. FPGA PLD Total revenue Communications Industrial and other Computing Consumer and automotive Total revenue respectively. New* Mainstream* Mature* Total revenue Mainstream: Mature: United States Export revenue: China Europe Japan Taiwan Other Asia Other Americas Total export revenue Total revenue Revenue related to resale of our products by sell-through distributors makes up 2010. plans. plans. Interest income Gain (loss) primarily related to sale or impairment of auction rate securities, net (Loss) gain and dividend on UMC investment Gain on debt buyback, net Gain on sale of land Gain (loss) on deferred compensation plan assets and other, net Total Net cash provided by (used in) operating activities Net cash provided by investing activities Net cash used in financing activities Net increase (decrease) in cash and cash equivalents 2009 income. 2010. will be available when needed or, if available, will be on favorable terms. Any future equity financing will decrease existing Fiscal year 2010 2011 2012 2013 2014 Our investments in auction rate securities are subject to interest rate and market risk. Consolidated Financial Statements: Consolidated Balance Sheets, at January Consolidated Financial Statement Schedule: Current assets: Cash and cash equivalents Short-term marketable securities Accounts receivable, net Other receivable Inventories Current portion of foundry advances Prepaid expenses and other current assets Total current assets Foundry advances and other assets Property and equipment, less accumulated depreciation Long-term marketable securities Intangible assets, less accumulated amortization Total assets Current liabilities: Accounts payable and accrued expenses Accrued payroll obligations Deferred income and allowances on sales to distributors Total current liabilities Other long-term liabilities Total liabilities Commitments and contingencies (See “Note 16—Commitments and Contingencies”) Stockholders’ equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued and outstanding Common stock, $.01 par value, 300,000,000 shares authorized, 115,592,000 and 115,469,000 shares issued and outstanding Paid-in capital Treasury stock at cost, 263,000 shares Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity Revenue Costs and expenses: Cost of products sold Research and development Selling, general and administrative Impairment loss on goodwill Amortization of intangible assets Restructuring charges Loss from operations Other income (expense), net Loss before provision for income taxes Provision for income taxes Net loss Basic net loss per share Diluted net loss per share Shares used in per share calculations: Basic Diluted Balances, December 30, 2006 Cumulative effect adjustment (see Note 10) Net loss for 2007 Unrealized loss, net, related to marketable securities and foundry investments Translation adjustments Comprehensive loss Common stock issued in connection with exercise of stock options, ESPP and net vested RSUs Stock-based compensation expense related to stock options, ESPP and RSUs Distribution of stock held by deferred stock compensation plan Balances, December 29, 2007 Net loss for 2008 Unrealized gain, net, related to marketable securities and foundry investments Translation adjustments Comprehensive loss Common stock issued in connection with exercise of stock options, ESPP and net vested RSUs Stock-based compensation expense related to stock options, ESPP and RSUs Distribution of stock held by deferred stock compensation plan Balances, January 3, 2009 Net loss for 2009 Unrealized gain, net, related to marketable securities Recognized gain on redemption of marketable securities, previously unrealized Translation adjustments Comprehensive loss Common stock issued in connection with exercise of stock options, ESPP and net vested RSUs Stock repurchase Stock-based compensation expense related to stock options, ESPP and RSUs Distribution of stock held by deferred stock compensation plan Balances, January 2, 2010 Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization Gain on extinguishment of convertible notes Impairment charge on goodwill and acquired intellectual property Impairment of Long-term marketable securities and Other current assets Gain on sale of equity securities Loss on sale of UMC common stock Gain on sale of land Stock-based compensation Changes in assets and liabilities: Accounts receivable, net Other receivable Inventories Prepaid expenses and other current assets Foundry advances (includes advance credits) Accounts payable and accrued expenses (includes restructuring) Accrued payroll obligations Deferred income and allowances on sales to distributors Other liabilities Net cash provided by (used in) operating activities Cash flows from investing activities: Proceeds from sales or maturities of marketable securities Purchase of marketable securities Proceeds from sale of UMC common stock Proceeds from sale of land Capital expenditures Net cash provided by investing activities Cash flows from financing activities: Extinguishment of Zero Coupon Convertible Subordinated Notes Advances on yen line of credit Payment on yen line of credit Net share settlement upon issuance of RSUs Treasury stock Net proceeds from issuance of common stock Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Beginning cash and cash equivalents Ending cash and cash equivalents Supplemental disclosures of non-cash investing and financing activities: Unrealized gain (loss) on assets measured at fair value, net, included in Accumulated other comprehensive loss Distribution of deferred compensation from trust assets Non-cash exchange of Other receivable for Foundry advances, investments and other assets be recoverable. Impairment is determined by comparing the estimated undiscounted cash flows to the carrying amount. A loss is recorded if the carrying amount of the asset exceeds the estimated undiscounted cash flow for the difference between carrying value and fair value. Basic and diluted net loss Shares used in basic net loss per share Dilutive effect of stock options, warrants and convertible notes Shares used in diluted net loss per share Basic net loss per share Diluted net loss per share Income (Loss) out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This update clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. Short-term marketable securities: Long-term marketable securities: Due after five years through ten years Due after ten years No contractual maturity date Short-term marketable securities: Auction Rate Securities (by type of underlying asset): Corporate and municipal bonds, notes and commercial paper Market rate investments Long-term marketable securities: Auction Rate Securities (by type of underlying asset): Federally insured or FFELP guaranteed student loans Corporate bonds, subject to credit default swap risk Auction market preferred shares Long-term marketable securities Federally-insured student loans Corporate notes Ambac Assurance Corporation resume or reasonable offers become available. Short-term marketable securities Long-term marketable securities Total assets measured at fair value Beginning fair value of Long-term marketable securities Fair value of securities sold or redeemed Temporary or other-than-temporary fluctuations in fair value Ending fair value of Long-term marketable securities income. Work in progress Finished goods Land Buildings Computer and test equipment Office furniture and equipment Leasehold and building improvements Accumulated depreciation and amortization Foundry advances and other assets Less: Current portion of foundry advances Assets: amortized. Fiscal year 2010 2011 2012 2013 2014 Thereafter Current: Federal State Foreign Deferred: Federal State Foreign Provision for income taxes Computed income tax benefit at the statutory rate Adjustments for tax effects of: State taxes, net Research and development credits Foreign taxes Foreign dividends Valuation allowance Change in uncertain tax benefit accrual Goodwill impairment Amortization of intangibles related to acquisitions Stock-based compensation Tax rate change Other Provision for income taxes Deferred tax assets: Accrued expenses and reserves Inventory Deferred revenue Stock-based and deferred compensation Intangible assets Fixed assets Net operating loss carryforward Tax credit carryforward Capital loss carryforward Unrealized loss on securities Other Less: valuation allowance Net deferred tax assets Deferred tax liabilities: Prepaid expenses Other Total deferred tax liabilities Net deferred tax assets Unrecognized tax benefit Balance at December 31, 2006 Additions based on tax positions related to the current year Additions based on tax positions of prior years Reduction for tax positions of prior years Settlements Reduction as a result of lapse of applicable statute of limitations Balance at December 30, 2007 Additions based on tax positions related to the current year Additions based on tax positions of prior years Reduction for tax positions of prior years Settlements Reduction as a result of lapse of applicable statute of limitations Balance at January 3, 2009 Additions based on tax positions related to the current year Additions based on tax positions of prior years Reduction for tax positions of prior years Settlements Reduction as a result of lapse of applicable statute of limitations Balance at January 2, 2010 Oregon. 2009 Restructuring Plans Severance and related costs Lease loss reserve Other Subtotal Pre-2009 Restructuring Plans Lease loss reserve and other Total restructuring plans Severance and related costs Lease loss reserve Other Notes: Line item: Cost of products sold Research and development Selling, general and administrative Restructuring charges Employee and Director Stock Options Expected volatility (%) Risk-free interest rate (%) Expected term (in years) Dividend yield Employee Stock Purchase Plan Weighted average expected volatility (%) Weighted average risk-free interest rate (%) Expected term (in years) Dividend yield Balance, January 3, 2009 Granted Exercised Forfeited, expired or exchanged Balance, January 2, 2010 Vested and expected to vest at January 2, 2010 Exercisable, January 2, 2010 Balance, January 3, 2009 Granted Vested Forfeited Balance at January 2, 2010 2008. 2008. million, and the aggregate maximum cash award for all management participants totals approximately $3.0 million. The maximum amount of cash that can be paid out under the 2010 Plan is $6.5 million. During fiscal 2010, the Company recorded a charge of $5.4 million under the 2010 Plan, which is recorded on the Consolidated Balance Sheet in Accrued payroll obligations. Cash incentive awards United States Export revenue: China Europe Japan Taiwan Other Asia Other Americas Total export revenue Total revenue Revenue Gross margin Restructuring charges (adjustment) Net income (loss) Basic net income (loss) per share Diluted net income (loss) per share 11, 2011 1, 2011 23, 2010. Equity compensation plans: Approved by security holders (1) Not approved by security holders Total Description (Registrant) 11, 2011 Signature Title Column A Classification Fiscal year ended January 2, 2010: Allowance for deferred taxes Allowance for doubtful accounts Allowance for warranty expense Fiscal year ended January 3, 2009: Allowance for deferred taxes Allowance for doubtful accounts Allowance for warranty expense Fiscal year ended December 29, 2007: Allowance for deferred taxes Allowance for doubtful accounts Allowance for warranty expensetwoan 18,869 square foot research and development facilities totaling 29,000 square feetfacility and lease an additional 8,0006,481 square foot research and development facility. We currently lease a 66,350 square foot research and development facility in San Jose, California through December 2013. We also currently lease a 6,400 square foot research and development facility in Illinois through August 2012, and a 20,000 square foot research and development facility in Pennsylvania through September 2014. In addition, we completed a lease agreement in December 2009, for a 4,200 square foot facility in Singapore, with a term through February 2013, primarily to support supply chain activities. In October 2010, we completed a lease agreement for a 5,296 square foot research and development facility in Bangalore, India with a term through October 2012. We also lease office facilities in multiple metropolitan locations for our domestic and international sales staff. We believe that our existing facilities are suitable and adequate for our current and foreseeable future needs.attorneys’attorneys' fees and expenses. The Company filed a request for re-examination of the patent by the United States Patent and Trademark Office (“PTO”), which was granted by the PTO, and the re-examination is in progress. The litigation has been stayed pending the results of the re-examination. NeitherAt this stage of the proceedings, we do not have an estimate of the likelihood noror the amount of any potential exposure to us.can be estimated atand Freescale Semiconductor, Inc. in the U.S. District Court for the Eastern District of Texas, Tyler Division, seeking unspecified damages. At this time.[Reserved]Registrant’sRegistrant's Common Equity, Related Stockholder Matters & Issuer Purchases of Equity Securities.Our Low High $ 1.06 $ 1.74 1.38 2.26 1.66 2.71 1.87 3.00 $ 2.26 $ 3.27 2.79 4.00 2.11 3.35 1.04 2.21 Low High 2010: First Quarter $ 2.41 $ 3.80 Second Quarter 3.69 5.97 Third Quarter 4.11 6.02 Fourth Quarter 4.24 6.17 2009: First Quarter $ 1.06 $ 1.74 Second Quarter 1.38 2.26 Third Quarter 1.66 2.71 Fourth Quarter 1.87 3.00 5, 2010,10, 2011, we had approximately 431402 stockholders of record.Period Total Number of Shares Purchased Average Price paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program November 28, 2010 through Janaury 1, 2011 371,090 $ 5.31 371,090 $ 18,029,000 Total 371,090 $ 5.31 371,090 $ 18,029,000 the Company’sour Board of Directors approved a stock repurchase program pursuant to which up to $20.0 million of outstanding common stock may be repurchased from time to time.could have been repurchased. In connection with the stock repurchase program, we entered into a 10b5-1 plan. The duration of the repurchase program was twelve months from adoption, and expired on December 13, 2009. During fiscal 2009, approximately 263,000 shares were repurchased for $0.3 million, all of which were open market transactions and were funded from available working capital. ThereAll shares repurchased under this program were no purchasesretired in fiscal 2008.Poor’sPoor's (“S&P”) 500 Index and the Philadelphia Semiconductor Index (“SOX”) from December 20042005 through December 2009.2010. Cumulative stockholder return assumes $100 invested at the beginning of the period in our common stock, the S&P 500 and SOX. Historical stock price performance is not necessarily indicative of future stock price performance.
Year Ended January 2,
2010 January 3,
2009 December 29,
2007 December 30,
2006 December 31,
2005 (in thousands, except per share data) $ 194,420 $ 222,262 $ 228,709 $ 245,459 $ 211,060 90,077 102,831 103,157 106,727 95,925 56,133 68,610 82,977 81,968 97,231 52,545 58,680 58,485 58,450 57,541 — — 223,556 — — 228 5,587 9,832 10,806 14,392 3,689 6,789 2,372 311 11,936 202,672 242,497 480,379 258,262 277,025 (8,252 ) (20,235 ) (251,670 ) (12,803 ) (65,965 ) 1,812 (17,791 ) 12,540 16,951 17,079 (6,440 ) (38,026 ) (239,130 ) 4,148 (48,886 ) 517 180 686 1,055 233 $ (6,957 ) $ (38,206 ) $ (239,816 ) $ 3,093 $ (49,119 ) $ (0.06 ) $ (0.33 ) $ (2.09 ) $ 0.03 $ (0.43 ) $ (0.06 ) $ (0.33 ) $ (2.09 ) $ 0.03 $ (0.43 ) 115,384 115,291 114,915 114,188 113,525 115,384 115,291 114,915 115,019 113,525 At January 2,
2010 January 3,
2009 December 29,
2007 December 30,
2006 December 31,
2005 (in thousands) $ 164,540 $ 65,909 $ 85,063 $ 233,208 $ 264,192 $ 296,557 $ 291,936 $ 376,285 $ 725,906 $ 715,857 $ — $ — $ 40,000 $ 109,600 $ 133,500 $ 253,360 $ 254,939 $ 286,232 $ 511,745 $ 500,257 (1)Upon the adoption of ASC 718 effective January 1, 2006, deferred stock compensation expense related to acquisitions (attributable to research and development activities) and previously classified as part of Amortization of intangible assets has been reclassified to Research and development expense. Such deferred stock compensation attributable to research and development activities was completely recognized as of April 1, 2006. As a result of the reclassification, Research and development expense includes $1.8 million of amortization of deferred stock compensation expense for the fiscal year ended December 31, 2005. Year Ended January 1,
2011 January 2,
2010 January 3,
2009 December 29,
2007 December 30,
2006 (in thousands, except per share data) STATEMENT OF OPERATIONS DATA: Revenue $ 297,768 $ 194,420 $ 222,262 $ 228,709 $ 245,459 Costs and expenses: Cost of products sold 117,943 90,077 102,831 103,157 106,727 Research and development 60,326 56,133 68,610 82,977 81,968 Selling, general and administrative 64,359 52,545 58,680 58,485 58,450 Impairment loss on goodwill — — — 223,556 — Amortization of intangible assets — 228 5,587 9,832 10,806 Restructuring charges 11 3,689 6,789 2,372 311 242,639 202,672 242,497 480,379 258,262 Income (loss) from operations 55,129 (8,252 ) (20,235 ) (251,670 ) (12,803 ) Other income (expense), net 2,474 1,812 (17,791 ) 12,540 16,951 Income (loss) before provision for income taxes 57,603 (6,440 ) (38,026 ) (239,130 ) 4,148 Provision for income taxes 531 517 180 686 1,055 Net income (loss) $ 57,072 $ (6,957 ) $ (38,206 ) $ (239,816 ) $ 3,093 Basic net income (loss) per share $ 0.49 $ (0.06 ) $ (0.33 ) $ (2.09 ) $ 0.03 Diluted net income (loss) per share $ 0.48 $ (0.06 ) $ (0.33 ) $ (2.09 ) $ 0.03 Shares used in per share calculations: Basic 116,726 115,384 115,291 114,915 114,188 Diluted 120,143 115,384 115,291 114,915 115,019 At January 1,
2011 January 2,
2010 January 3,
2009 December 29,
2007 December 30,
2006 (in thousands) BALANCE SHEET DATA: Cash, cash equivalents and Short-term marketable securities $ 238,220 $ 164,540 $ 65,909 $ 85,063 $ 233,208 Total assets $ 377,687 $ 296,557 $ 291,936 $ 376,285 $ 725,906 Convertible notes $ — $ — $ — $ 40,000 $ 109,600 Stockholders' equity $ 318,722 $ 253,360 $ 254,939 $ 286,232 $ 511,745 Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations.products—products - programmable logic devices (“PLD”) and field programmable gate arrays (“FPGA”)— - each representing a distinct silicon architectural approach. Products based on the two alternative programmable logic architectures are generally optimal for different types of logic functions, although many logic functions can be implemented using either architecture. We believe that a substantial portion of programmable logic customers utilize both PLD and FPGA architectures. Our end customers are primarily original equipment manufacturers in the communications, computing, industrial, consumer, automotive, medical and military end markets.company’scompany's financial condition and results and require management’smanagement's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. A description of our critical accounting policies follows.generally recognized upon shipment, or in the case of sales by our sell-through distributors, at the time of reported resale, provided that persuasive evidence of a salesan arrangement exists, the price is fixed or determinable, title has transferred, collection of resulting receivables is probable,reasonably assured, there are no customer remaining acceptance requirements and no remaining significant obligations. We sell our products directly to end customers or through a network of independent manufacturers’manufacturers' representatives and indirectly through a network of independent sell-in and sell-through distributors. Revenue and cost relating to sell-through distributor sales are deferred until either the product is sold by the distributor or return privileges terminate, at which time related distributor resale revenue, effects of distributor price adjustments, and costs are reflected in income. Our revenue reporting is highly dependent on receiving pertinent and accurate data from our distributors in a timely fashion. Distributors provide us periodic data regarding the product, price, quantity, and end customer when products are resold as well as the quantities of our products they still have in stock. We must use estimates and apply judgmentsjudgment to reconcile distributors’sell-through distributors' reported inventories to their activities. Any error in our judgment could lead to inaccurate reporting of our revenues, deferred income and allowances on sales to distributors, and net income. Revenue, from software licensing was not material for the periods presented.We enter into arrangements with certain sell-through distributors to issue accounts receivable credit adjustments (“distributor advances”) to reduce the distributors’ working capital required to service our end customers. The distributor advances are for estimated future price discounts and are recorded as a reductionCost of products sold, Deferred income and allowances on sales to sell-through distributors, and Net income (loss).These arrangementsRevenue and cost of products sold to sell-through distributors are unsecured, bear no interest,deferred until either the product is resold by the distributor or, in certain cases, return privileges terminate, at which time Revenue and Cost of products sold are settled on a quarterly basisreflected in Net income (loss). Our estimate of inventory valued at published list price and are due upon demand. The distributor advances have no impact on revenue recognition andheld by sell-through distributors with right of return totaled $16.5$50.1 million and $6.3$31.7 million at January 1, 2011 and January 2, 2010, respectively. Distributor advances totaled $26.8 million and $16.5 million at January 3, 2009,1, 2011 and January 2, 2010, respectively and are recorded in Deferred income and allowances to sell-through distributors. Deferred costs of sales related to inventory held by sell-through distributors totaled $7.6 million and $5.0 million at January 1, 2011 and January 2, 2010, respectively.we expect the majoritywill bewas from reported resale from our sell-through distributors. Resale of product by sell-through distributors as a percentage of our total revenue was 38%56%, 33%38% and 36%33% in fiscal 2010, 2009 and 2008, and 2007, respectively.Disclosures” (“ASC 820”)Disclosures". The framework under the provisions of ASC 820 establishes three levels of inputs that may be used to measure fair value. Each level of input has different levels of subjectivity and difficulty involved in determining fair value.Equipment” (“ASC 360”)Equipment", which requires us to review the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is determined by comparing the estimated undiscounted cash flows to the carrying amount. A loss is recorded if the carrying amount of the asset exceeds the estimated undiscounted cash flows.Goodwill. At December 29, 2007,flow for the estimated fair value of the Company was below book value. Therefore, the Company performed an impairment test on Goodwill in accordance with ASC 350, “Intangibles—Goodwill and Other.” We calculated the impairment loss based on an allocation of the fair value of the Company’s equity to the fair value of the Company’s assets and liabilities in a manner similar to a purchase price allocation in a business combination. Fair value was based on two primary valuation methodologies: the income approach, which used the discounted cash flow method, and the market approach, which used the market capitalization method. In the allocation, goodwill was determined to have no implied fairdifference between carrying value and as a result, goodwill related to the acquisition of Vantis Corporation on June 15, 1999, the acquisition of Integrated Intellectual Properties, Inc. on March 16, 2001, and the acquisition of the FPGA business of Agere Systems, Inc. on January 18, 2002 totaling $223.6 million was written off and recorded as an Impairment loss on goodwill. As a result, we no longer have Goodwill recorded on our Consolidated Balance Sheets.fair value.“Compensation—“Compensation - Nonretirement Postemployment Benefits.” For leased facilities that are vacated, an amount equal to the total future lease obligations from the date of vacating the premises through the expiration of the lease, net of any future sublease income, is recorded as a part of restructuring charges.2008 and 2007,2008, we have recorded full valuation allowances for all of our U.S. deferred tax assets due to uncertainties regarding their realization. At the end of fiscal years 2009 and 2008 we no longerWe have not recognized a valuation allowance against our foreign deferred tax assets as we believe it is more likely than not that the deferred tax assets will be realized.Taxes.Taxes,” We recognize estimated interest and penalties that would be assessed in relation to the estimated settlement value of uncertain tax positions in the Provision for income taxes. In the first quarter of 2006, we adopted ASC 718, “Compensation—Stock Compensation,” which requires the measurement at fair value and recognition of compensation expense for all share-based payment awards. Determining the appropriate fair-value model and calculating the fair value of employee stock options and rights to purchase shares under stock purchase plans at the date of grant requires judgment. We use the Black-Scholes option pricing model to estimate the fair value of substantially all of these share-based awards consistent with the provisions of ASC 718. Option pricing models, including the Black-Scholes model, also require the use of input assumptions, including expected volatility, expected term, expected dividend rate, and expected risk-free rate of return. The assumptions for expected volatility and expected term are the two assumptions that significantly affect the grant date fair value.Company’sCompany's equity compensation practices for employees who receive equity grants. The restricted stock units granted to employees generally vest quarterly over a four-year period beginning on the grant date. Year Ended January 2, 2010 January 3, 2009 December 29, 2007 $ 194,420 100.0 % $ 222,262 100.0 % $ 228,709 100.0 % 104,343 53.7 119,431 53.8 125,552 54.9 56,133 28.9 68,610 30.9 82,977 36.3 52,545 27.0 58,680 26.4 58,485 25.6 — — — — 223,556 97.7 228 0.1 5,587 2.5 9,832 4.3 3,689 1.9 6,789 3.1 2,372 1.0 $ (8,252 ) (4.2 )% $ (20,235 ) (9.1 )% $ (251,670 ) (110.0 )% Year Ended January 1, 2011 January 2, 2010 January 3, 2009 Revenue $ 297,768 100.0 % $ 194,420 100.0 % $ 222,262 100.0 % Gross margin 179,825 60.4 104,343 53.7 119,431 53.8 Research and development 60,326 20.3 56,133 28.9 68,610 30.9 Selling, general and administrative 64,359 21.6 52,545 27.0 58,680 26.4 Amortization of intangible assets — — 228 0.1 5,587 2.5 Restructuring charges 11 0.0 3,689 1.9 6,789 3.1 Income (loss) from operations $ 55,129 18.5 % $ (8,252 ) 4.2 % $ (20,235 ) (9.1 )% $194.4$194.4 million as compared to $222.3$222.3 million in fiscal 2008 primarily due to a reduction in revenue from Mature and Mainstream products, partially offset by an increase in revenue from New products. Revenuedecreased to $222.3 million as compared to $228.7 million in fiscal 2007 primarily due torespectively. Accordingly, a reduction insignificant portion of our revenue from Mature and Mainstream products, partially offset by an increase inis dependent on the health of this end market. Forecasting future revenue from New products.In light of the difficult global economic environment, forecasting for all of 2010 is particularly challenging as revenue growth is dependent on overall economic conditions for our industry and there is limited visibility to the broad market for programmable logic devices; however, the communication market in Asia appears to be showing a better than expected revenue trend. We believe that we will experience an increase in revenue in the first halfacceptance of 2010, when compared to the first half of 2009.From aviewpoint, therecategories driven by demand for our New products.year 2009 compared to fiscal 2008 and a 32% increase for fiscal year 2008 compared to fiscal 2007, in FPGA units sold primarily driven by an increase in demand for our FPGA New products. PLD revenue decreased in fiscal 2009, when compared to fiscal 2008 due to a decline in units sold, primarily related to Mature and Mainstream products, partially offset by an increase in average selling prices. PLD revenue decreased in fiscal 2008, when compared to fiscal 2007 due to a decline in both units sold and average selling prices. 2008 and 20072008 was as follows (dollars in thousands): Year Ended January 2, 2010 January 3, 2009 December 29, 2007 $ 64,564 33 % $ 57,853 26 % $ 51,970 23 % 129,856 67 % 164,409 74 % 176,739 77 % $ 194,420 100 % $ 222,262 100 % $ 228,709 100 % Year Ended January 1, 2011 January 2, 2010 January 3, 2009 FPGA $ 97,089 33 % $ 64,564 33 % $ 57,853 26 % PLD 200,679 67 % 129,856 67 % 164,409 74 % Total revenue $ 297,768 100 % $ 194,420 100 % $ 222,262 100 % 56%49%, 54%,56% and 51%54% of our revenue for the fiscal years 2010, 2009 2008 and 2007,2008, respectively. We supported the China 3G telecommunications network build-out during fiscal 2009 primarily with products sold to twoOur revenue for this end market is largely dependent on five large telecommunications equipment providers, however, singularly none exceeded 10% in fiscal 2010 and 2008, and one of which was throughaccounted for approximately 11% of fiscal 2009 revenue although it resulted from sell-through resale by one of our distributors. It is uncertain that this trend will continue into 2010. We expect that a significant portion of our revenue will continue to be dependent on the health of the communications end market. 2008 and 20072008 was as follows (dollars in thousands): Year Ended January 2, 2010 January 3, 2009 December 29, 2007 $ 108,780 56 % $ 119,370 54 % $ 116,866 51 % 34,907 18 % 49,829 22 % 59,225 26 % 27,086 14 % 27,004 12 % 25,567 11 % 23,647 12 % 26,059 12 % 27,051 12 % $ 194,420 100 % $ 222,262 100 % $ 228,709 100 % Year Ended January 1, 2011 January 2, 2010 January 3, 2009 Communications $ 146,607 49 % $ 108,780 56 % $ 119,370 54 % Industrial and other 75,667 25 % 37,248 19 % 52,346 23 % Computing 42,969 15 % 27,086 14 % 27,004 12 % Consumer 32,525 11 % 21,306 11 % 23,542 11 % Total revenue $ 297,768 100 % $ 194,420 100 % $ 222,262 100 % 44%91% for fiscal 2010 as compared to fiscal 2009, and 77% for fiscal 2009 and 99% foras compared to fiscal 2008, primarily as a result of increased unit sales. Revenue from Mainstream products increased 33% for 2010 but decreased 28% for fiscal 2009 primarily related to an increase and 11% for fiscal 2008 primarily as a result of a declinedecrease in units sold.unit sales, respectively. Mature product revenue increased 35% in fiscal 2010 and decreased 39%34% for fiscal 2009 primarily related to an increase and 27% for fiscal 2008 as a result of decreaseddecrease in unit sales, partially offset by an increase in average selling prices. 2008 and 20072008 was as follows (dollars in thousands): Year Ended January 2, 2010 January 3, 2009 December 29, 2007 $ 83,170 43 % $ 57,670 26 % $ 28,949 13 % 73,046 37 % 101,742 46 % 113,824 50 % 38,204 20 % 62,850 28 % 85,936 37 % $ 194,420 100 % $ 222,262 100 % $ 228,709 100 % Year Ended January 1, 2011 January 2, 2010 January 3, 2009 New* $ 126,648 43 % $ 66,294 34 % $ 37,395 17 % Mainstream* 98,413 33 % 74,218 38 % 103,055 46 % Mature* 72,707 24 % 53,908 28 % 81,812 37 % Total revenue $ 297,768 100 % $ 194,420 100 % $ 222,262 100 % *Product classificationNew:* Product classification New: LatticeECP3, Lattice XP2, LatticeSC,LatticeXP2, LatticeECP2/M, LatticeECP, LatticeXP, MachXO, Power Manager1/2, ispClock1/2,Manager II, ispClockA/D/S, ispMACH 4000ZEFPSC, ispXPLD, ispGDX2, ispMACH 4/LV, ispGDX/V, ispMACH 4000/Z, ispXPGA, LatticeSC, LatticeECP, LatticeXP, ispClock, Power Manager I, Software and IPFPSC, ORCA 2, ORCA 3, ORCA 4, ispPAC, ispLSI 8000V, ispMACH 5000B, ispMACH 2LV, ispMACH 5LV, ispLSI 2000V, ispLSI 5000V, ispMACH 5000VG, all 5-Volt5-volt CPLDs, GDX/V, ispMACH 4/LV, all SPLDs20072010 we reclassified our New, Mainstream and Mature product categories to better reflect our current product portfolio. Year Ended January 2, 2010 January 3, 2009 December 29, 2007 Total % Total % Total % $ 28,296 15 $ 37,817 17 $ 42,681 19 83,813 43 62,110 28 51,765 23 33,389 17 46,411 21 46,254 20 19,460 10 30,624 14 30,723 13 6,313 3 20,453 9 25,945 11 17,476 9 16,422 7 23,258 10 5,673 3 8,425 4 8,083 4 166,124 85 184,445 83 186,028 81 $ 194,420 100 $ 222,262 100 $ 228,709 100 Year Ended January 1, 2011 January 2, 2010 January 3, 2009 Total % Total % Total % United States $ 36,211 12 $ 28,296 15 $ 37,817 17 Export revenue: China 124,910 42 83,813 43 62,110 28 Europe 54,332 18 33,389 17 46,411 21 Japan 38,992 13 19,460 10 30,624 14 Taiwan 8,839 3 6,313 3 20,453 9 Other Asia 27,853 10 17,476 9 16,422 7 Other Americas 6,631 2 5,673 3 8,425 4 Total export revenue 261,557 88 166,124 85 184,445 83 Total revenue $ 297,768 100 $ 194,420 100 $ 222,262 100 2008 and 81% for 2007.2008. Export revenue as a percentage of overall revenue increased in fiscal 20092010 compared to 20082009 and 20072008 due to relatively more favorable business conditions in Asia and a continuing trend towards outsourcing of manufacturing by North American and European customers to Asia.the Companywe embarked on a program to restructure itsour distribution channels, primarily in the Asia Pacific region, from a sell-in to a sell-through distribution model. As a result we expect the majority of our revenue in fiscal 2010 to bewas from resale of our products by sell-through distributors. In connection with this program, Latticewe terminated our distribution agreement between Latticethe Company and Promaster Technology Corporation on July 2, 2009, between Latticethe Company and Dragon Technology Distribution and FE Global Electronics effective for various territories on February 1 and February 6, 2010, respectively, and between Latticethe Company and other distributors effective on various dates. Dragon Technology Distribution and FE Global Electronics are wholly-owned subsidiaries of ASTI Holdings Ltd. Additionally, we converted in-place distributors in the Asia Pacific region and Europe from a sell-in to a sell-through model. As a result, we estimate that revenue was lower in the fourth quarter of fiscal 2009 by approximately $2.0 million compared to revenue had we not embarked on this program.2008 and 54.9% for 2007.2008. The increase in gross margin percentage fromduring fiscal 20082010 compared to 2009 and fiscal 20072009 was primarily attributed to 2008 declined primarily from a declinethe significantly higher production volume in fiscal 2010 when compared to fixed overhead costs charged to Cost of products sold. Additionally, due to the broad based nature of our revenue increase, revenue from our Mature and Mainstream products, which typically carry a higher gross margin than our otherNew product categories, as well as revenue growthincreased during fiscal 2010. We benefited from Newthe cost reduction actions undertaken in fiscal 2009, primarily lower freight-in costs. We also realized a benefit related to some sales of older, fully reserved products which typically carry an initial lower gross margin than our other product categories. Additionally, in the fourth quarter of fiscal 2008, we wrote down excess inventory of $2.1 million, resulting in a charge to Cost of products sold.compared toand $68.6 million for fiscal 2008 and $83.0 million for fiscal 2007.2008. Research and development expenses consist primarily of personnel, masks, engineering wafers, third-party design automation software, assembly tooling and qualification expenses. The increase in fiscal 2010 compared to fiscal 2009 was related to personnel related costs, primarily accrued bonus costs recorded in connection with the 2010 Cash Incentive Compensation Plan, as well as an increase in outside service costs for engineering development. The decrease in fiscal 2009 compared to fiscal 2008 was primarily a result of a decrease in labor costs as a result of the restructuring plans implemented in the third and fourth quarters of 2009 (“2009 restructuring plan” and “December 2009 restructuring plan,” collectively referred to as the “2009 restructuring plans”) and the full year effect of the restructuring plan implemented in the third quarter of 2008, (“2008 restructuring plan”), offset by an increase in mask and wafer costs. The decrease in2009 and 2008 compared to fiscal 2007 was primarily a result of a decrease in labor costs as a result of the full year effect of the restructuring plan implemented in the third quarter of 2007 (“2007 restructuring plan”) and the 2008 restructuring plan, and a decrease in mask and wafer costs. The 2009, 2008 and 2007 restructuring plans are further described below. We believe that a continued commitment to research and development is essential to maintain product leadership and provide innovative new product offerings, and therefore we expect to continue to make significant future investments in research and development. As we continue to move to more advanced process technologies such as 65nm, mask and engineering wafer costs are becoming increasingly more expensive and will therefore increasingly represent a greater proportion of total research and development expenses.2008 and $58.5 million2008. The increase in fiscal 2007.2010 compared to fiscal 2009 was primarily a result of an increase in sales commission costs, marketing related costs and accrued bonus costs recorded in connection with the 2010 Cash Incentive Compensation Plan. Selling, general and administrative expense was lower in fiscal 2009 when compared to fiscal 2008 primarily related to a decrease in labor and facility costs as a result of the 2009 and 2008 restructuring plans and essentially flat when comparing fiscal 2008 with fiscal 2007. Fiscal year 2007 included a reversal of accrued legal costs of $1.0 million.At December 29, 2007, the estimated fair value of the Company was below book value. Therefore, the Company performed an impairment test on Goodwill in accordance with ASC 350, “Intangibles—Goodwill and Other (“ASC 350”).” We calculated the impairment loss based on an allocation of the estimated fair value of the Company’s equity to the fair value of the Company’s assets and liabilities in a manner similar to a purchase priceallocation in a business combination. Fair value was based on two primary valuation methodologies: the income approach, which used the discounted cash flow method, and the market approach, which used the market capitalization method. In the allocation, goodwill was determined to have no implied fair value, and, as a result, goodwill related to the acquisition of Vantis Corporation on June 15, 1999, the acquisition of Integrated Intellectual Properties, Inc. on March 16, 2001, and the acquisition of the FPGA business of Agere Systems, Inc. on January 18, 2002 totaling $223.6 million was written off and recorded as a non-cash Impairment loss on goodwill.2008 and $9.8 million in fiscal 2007.2008. Amortization expense in fiscal 2009, 20082010 and 20072009 decreased as a portion of the intangible assets acquired in the Agere and Cerdelinx acquisitions became completely amortized during each fiscal year.Restructuring activity relates to theimplemented during the fourth quarter of fiscal years 2005, (“2005 restructuring plan”), the 2007, restructuring plan, the 2008 restructuring plan and the 2009 restructuring plans.2009. Included in our Consolidated StatementStatements of Operations and reported as Restructuring charges for fiscal 2010, 2009 is a net chargeand 2008 are charges of less than $0.1 million, $3.7 million which is comprised of charges of $3.8and $6.8 million, under the 2009 restructuring plansrespectively, primarily resulting from severance and related to severance costs and costs to vacate leased space, and a reversal of less than $0.1 millionproperties under the pre-2009these restructuring plans, primarily related to costs to vacate leased properties. Included in our Consolidated Statement of Operations and reported as Restructuring for fiscal 2008 is a net charge of $6.8 million which is comprised of charges of $4.1 million under the 2008 restructuring plan primarily related to severance costs and $2.7 million under the 2007 restructuring plan primarily related to severance costs and costs to vacate leased properties. Included in our Consolidated Statement of Operations and reported as Restructuring for fiscal 2007, is a net charge of $2.4 million. This amount is comprised of charges under the 2007 restructuring plan of $2.7 million, primarily related to a reduction in work force and a voluntary separation program for certain employees partially offset by a reversal of $0.3 million related to the settlement of the remaining lease obligation for our facility in the United Kingdom, which was closed in connection with the 2005 restructuring plan.Skaggs’Skaggs' severance agreement allowed for a partial acceleration of vesting of previously awarded stock options. As a result, the Company recorded a non-cash charge of $0.3 million in fiscal 2008 related to the effects of accelerated vesting. Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ 1,227 $ 4,003 $ 7,814 374 (19,715 ) — — (1,225 ) 476 — — 2,577 — — 1,604 211 (854 ) 69 $ 1,812 $ (17,791 ) $ 12,540 Year Ended January 1,
2011 January 2,
2010 January 3,
2009Interest income $ 998 $ 1,227 $ 4,003 Gain (loss) primarily related to sale or impairment of auction rate securities, net 668 374 (19,715 ) (Loss) on UMC investment — — (1,225 ) Gain on sale of real estate 720 — — Gain (loss) on deferred compensation plan assets and other, net 88 211 (854 ) Total $ 2,474 $ 1,812 $ (17,791 ) and in fiscal 2008 compared to fiscal 2007 was primarily attributable to a decrease in average invested balances as a result of the use of cash for extinguishment of Zero Coupon Convertible Subordinated Notes due in 2010 (“Convertible Notes”) and lower interest rates on invested balances. The $0.4$0.7 million in Gain (loss) primarily related to sale or impairment of auction rate securities, net, relates primarily to holdings in auction rate securities that are considered illiquid. Gain on debt buyback, net, relates to the extinguishment of Convertible Notes, net of amortization of associated issuance costs. Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ 98,942 $ 26,383 $ (28,496 ) 4,391 32,752 91,351 (932 ) (42,799 ) (65,960 ) $ 102,401 $ 16,336 $ (3,105 ) Year Ended January 1,
2011 January 2,
2010 January 3,
2009Net cash provided by operating activities $ 79,311 $ 98,942 $ 26,383 Net cash (used in) provided by investing activities (64,394 ) 4,391 32,752 Net cash provided by (used in) financing activities 3,398 (932 ) (42,799 ) Net increase in cash and cash equivalents $ 18,315 $ 102,401 $ 16,336 20092010 compared to 2008$26.4$26.4 million in fiscal 2008, primarily as a result of the receipt of a $60.0 million repayment in fiscal 2009, of the Company’sCompany's advance payment made to Fujitsu Limited (“Fujitsu”) in fiscal 2007, while no repayment was made in fiscal 2008, and in addition to an increased usage of Fujitsu advance credits in fiscal 2009. The net loss reported decreased from $38.2 million in fiscal 2008 to $7.0 million in fiscal 2009. The Company’sCompany's Accounts payable and accrued expenses provided $7.1 million due to increased purchases and longer payment terms in fiscal 2009 compared to fiscal 2008 and used $3.8 million in fiscal 2008, compared to fiscal 2007, primarily related to scheduled vendor payments. Accounts receivable, net, provided $2.9$2.9 million in fiscal 2008 and used $7.1$7.1 million in fiscal 2009 as a result of billing and collection timing. Inventory provided $6.8 million in fiscal 2009, compared to $7.3 million in fiscal 2008, as the Company continued to manage inventory levels to reflect customer demand.$28.4$28.4 million in fiscal 2009 compared to fiscal 2008 as purchases of marketable securities decreased due to a shift in our investment policy toward cash equivalents and corporate bonds, notes, and commercial paper in response to the uncertainties in the global credit and capital markets.$41.9$41.9 million for fiscal 2009 compared to fiscal 2008. The decrease was primarily due to the use of $40.0 million to extinguish Convertible Notes in fiscal 2008, while no extinguishments occurred in fiscal 2009.Fiscal 2008 compared to 2007Operating ActivitiesNet cash provided by operating activities was $26.4 million in fiscal 2008, compared to Net cash used in operating activities of $28.5 million in fiscal 2007, primarily as a result of a $37.5 million advance payment made to Fujitsu in fiscal 2007, while no payment was made in fiscal 2008. The Company’s inventory decreased $7.3 million resulting in additional cash from operations in fiscal 2008 compared to $1.2 million of net purchases in fiscal 2007. Accounts receivable, net, increased $6.7 million in fiscal 2007 and decreased $2.9 million in fiscal 2008 as a result of billing and collection timing.Investing ActivitiesNet cash provided by investing activities decreased by $58.6 million in fiscal 2008 compared to fiscal 2007. The decrease was due to the sales of marketable securities to fund the $37.5 million advance payment to Fujitsu and the $66.6 million used to extinguish Convertible Notes in fiscal 2007, while no payments were made to Fujitsu and only $40.0 million was used to extinguish Convertible Notes in fiscal 2008. Further, purchases of marketable securities decreased due to a shift in our investment policy toward cash equivalents and corporate bonds, notes, and commercial paper in response to the uncertainties in the global credit and capital markets.Financing ActivitiesNet cash used in financing activities decreased $23.2 million in 2008 compared to fiscal 2007. The decrease was primarily due to the use of $66.6 million to extinguish Convertible Notes in fiscal 2007, while only $40.0 million was used to extinguish Convertible Notes in fiscal 2008.2, 2010,1, 2011, our principal source of liquidity was $164.5$238.2 million of Cash and cash equivalents and Short-term marketable securities, which was approximately $98.6$73.7 million more than the balance of $65.9$164.5 million at January 3, 20092, 2010.Working capital increased to $205.5$271.0 million at January 1, 2011, from $182.5$205.5 million at January 3, 2009.2, 2010.Under the terms of a letter agreement between the Company and Fujitsu, Fujitsu agreed to repay in cash to the Company $60.0 million (recorded as Other receivable in the Consolidated Balance Sheet at January 3, 2009), plus interest, which was received in fiscal 2009 on the outstanding portion of the Advance Payment made by us to Fujitsu under the terms of an Advance Payment and Purchase Agreement. In addition, we expect to receive the remaining advance of approximately $11.5 million in the form of wafer credits or other services, including engineering mask set charges, by the end of the second quarter of the Company’s fiscal 2010, at which time cash flow from operations will no longer include receipts of these credits. If we are required to make advances for future wafer supplies, such advances would be reported as funds used in operating activities. The repayment obligation of Fujitsu is unsecured. and January 3, 2009,, the Company held auction rate securities with a face value of $24.1 million and $39.2 million, respectively. During the year ended January 2, 2010, the Company accepted eight redemptions ranging from 40% to 100% of par value of auction rate securities.$11.6 million and $24.1 million, respectively. The Company intends to sell its auction rate securities as markets for these securities resume or reasonable offers become available. At January 2, 2010,1, 2011, due to continued multiple failed auctions and a determination of illiquidity, the $24.1$11.6 million par value of auction rate securities held by the Company had an estimated fair value of $12.9$10.2 million and are classified as Long-term marketable securities. At January 3, 2009, the fair value ofThese auction rate securities held by the Company and classified as Long-term marketable securities was $19.5 million.Long-term marketable securities with a par value of $15.7 million (estimated fair value of $12.7 million) are exposed to risks associated with student loan asset-backed notes. Such loans are insured by the federal government or guaranteed by the Federal Family Educational Loan Program (“FFELP”). Long-term marketable securities with a par value of $8.3 million (estimated fair value of $0.2 million) were replaced on December 3, 2008 by auction market preferred shares issued by Ambac Assurant Corporation (“AMBAC”), as a result of AMBAC exercising their put option feature provided in this security. On August 1, 2009, AMBAC discontinued paying monthly dividends on its auction market preferred shares, which reduced interest income included in Other income (expense), net, by less than $0.1 million per quarter.While the auctions for auction rate securities have historically provided a liquid market for these securities, due to liquidity issues in global credit and capital markets, auction rate securities held by us have experienced multiple failed auctions (a portion beginning in October 2007) as the amount of securities submitted for sale at the auctions has exceeded the amount of purchase orders. These instruments are considered illiquid and have been reclassified as Long-term marketable securities on the Consolidated Balance Sheets. Due to the severity of the decline in fair value, the duration of the decline, and the downgrading of the credit ratings on some of the securities, the Company determined that an other-than-temporary decline in fair value had occurred, and recorded additional impairment charges of $2.6 million for the fiscal year ended January 2, 2010.Program. If we were to liquidate our position in these securities, the amount realized could be materially different than the estimated fair value amounts at which we are carrying these securities and there could be a materially detrimental effect on our financial results.less than $0.1 million during the year ended January 2, 20101, 2011 on certain Short-term marketable securities, which has been recorded in Accumulated other comprehensive income (loss).income. Future fluctuations in fair value related to these instruments that the Company deems to be temporary, including any recoveries of previous write-downs, would be recorded to Accumulated other comprehensive income (loss).income. For the year ended January 2, 2010,1, 2011, approximately $1.0$0.7 million in unrealized gains related to the increase in fair value of auction rate securities were recorded in Accumulated other comprehensive income (loss).income. If the Company were to determine in the future that any further decline in fair value is other-than-temporary, we would record an other-than-temporary impairment charge, which could have a materially detrimental impact on our operating results. If we were to liquidate our position in these securities, it is likely that the amount of any future realized gain or loss would be different from the unrealized gain or loss reported in Accumulated other comprehensive income (loss).the Company’sour Board of Directors approved a stock repurchase program pursuant to which up to $20.0 million of outstanding common stock may be repurchased from time to time.could have been repurchased. In connection with the stock repurchase program, we entered into a 10b5-1 plan. The duration of the repurchase program was twelve months, and expired on December 13, 2009. During fiscal 2009, approximately 263,000 shares were repurchased for $0.3 million, all of which were open market transactions and were funded from available working capital. ThereAll shares repurchased under this program were no purchasesretired in fiscal 2008.stockholders’stockholders' equity percentage ownership and may, depending on the price at which the equity is sold, result in dilution.2, 20101, 2011 (in thousands): Operating
leases(1) Purchase
order
obligations(2) $ 4,080 $ 12,373 3,593 — 2,942 — 2,750 — 480 — $ 13,845 $ 12,373 Fiscal year Operating
leases(1) Purchase order
obligations(2)2011 $ 3,831 $ 20,168 2012 3,099 — 2013 2,802 — 2014 526 — 2015 39 — Thereafter 25 — $ 10,322 $ 20,168 _________ (1) Certain of our facilities and equipment are leased under operating leases, which expire at various times through 2014.2016. Included in the table above for operating leases is property located in Austin, Texas that was vacated as part of our 2005 restructuring plan. In fiscal 2007, we entered into a sublease agreement for this vacated property. For fiscal 2010,2011, future minimum lease payments, net of such sublease receipts, based on agreements in place at January 2, 2010,1, 2011, total $0.1 million.(2) This column excludes amounts already recorded on our Consolidated Balance Sheet as current or long-term liabilities at January 2, 2010.1, 2011.$7.0$7.7 million relating to uncertain tax positions. However, as we are unable to reliably estimate the timing of future payments related to uncertain tax positions, we have excluded this amount from the table above.$1.9$2.0 million with 3% annual increases. Our lease in Bethlehem expires in September 2014 with annual rental costs estimated to be $0.5 million with 3% annual increases. Our lease in Shanghai expires in May 2011 with annualremaining rental costs estimated to be $0.4$0.2 million. Our lease in Downers Grove expires in August of 2012 with annual rental costs estimated to be $0.2 million. Leasehold improvements are amortized over the shorter of the non-cancelable lease term or the estimated useful life of the assets.the Company reflectswe reflect multiple-element arrangements entered into subsequent to January 1, 2011, in the financial statements.The Company doesWe do not anticipate that the adoption of this statement will materially expand itsour consolidated financial statement footnote disclosures.2, 2010,1, 2011, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K. and January 3, 2009,, we held auction rate securities with a face value of $24.1$11.6 million and $39.2$24.1 million, respectively. At January 2, 2010,1, 2011, the auction rate securities held by us had an estimated fair value of $12.9$10.2 million. At January 3, 2009,2, 2010, the auction rate securities had an estimated fair value of $19.5$12.9 million.Additionally,In addition, a portion of our silicon wafer and other purchases are denominated in Japanese yen and we sell products tobill certain Japanese customers denominated in yen. We are, therefore, subject to foreign currency exchange rate exposure. To minimize foreign exchange risk relatedThese exposures are actively monitored by management, which may employ various strategies, including derivative financial instruments, to yen-based net assets on our Consolidated Balance Sheets, on August 11, 2004, we entered into an agreement with a bank undermitigate the terms of which we could borrow up to $6.0 million in Japanese yen in a revolving line of credit arrangement. In the first fiscal quarter of 2008, we amended the agreement to reduce the line of credit to $4.0 million. Outstanding borrowings were collateralized by a market rate investment account. Interest on outstanding borrowings were basedimpact on the Japanese LIBOR Fixed Rate. Outstanding borrowings at January 3, 2009 were $0.8 million and were reported in Accounts payable and accrued expenses on the Consolidated Balance Sheets. This arrangement was terminated by the Company during the first quarter of fiscal 2009.Company. We do not hold or issue derivative financial instruments for trading or speculative purposes. Page 2, 20101, 2011 and January 3, 2009 38 39 40 41 42 65 January 2,
2010 January 3,
2009 ASSETS $ 156,069 $ 53,668 8,471 12,241 33,551 26,404 — 60,000 25,925 32,703 11,475 19,157 7,980 7,663 243,471 211,836 3,640 20,080 36,507 40,307 12,939 19,485 — 228 $ 296,557 $ 291,936 LIABILITIES AND STOCKHOLDERS’ EQUITY $ 22,679 $ 16,947 5,118 6,693 10,160 5,741 37,957 29,381 5,240 7,616 43,197 36,997 — — 1,156 1,155 622,584 617,572 (326 ) — 158 (533 ) (370,212 ) (363,255 ) 253,360 254,939 $ 296,557 $ 291,936 January 1,
2011 January 2,
2010ASSETS Current assets: Cash and cash equivalents $ 174,384 $ 156,069 Short-term marketable securities 63,836 8,471 Accounts receivable, net 41,188 33,551 Inventories 37,333 25,925 Current portion of foundry advances — 11,475 Prepaid expenses and other current assets 8,648 7,980 Total current assets 325,389 243,471 Other long-term assets 2,744 3,640 Property and equipment, less accumulated depreciation 39,322 36,507 Long-term marketable securities 10,232 12,939 Total assets $ 377,687 $ 296,557 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 26,994 $ 22,679 Accrued payroll obligations 11,654 5,118 Deferred income and allowances on sales to sell-through distributors 15,692 10,160 Total current liabilities 54,340 37,957 Other long-term liabilities 4,625 5,240 Total liabilities 58,965 43,197 Commitments and contingencies (See “Note 15—Commitments and Contingencies”) Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued and outstanding — — Common stock, $.01 par value, 300,000,000 shares authorized, 117,971,000 and 115,592,000 shares issued and outstanding, excluding 371,000 and 263,000 shares of treasury stock 1,179 1,156 Paid-in capital 630,184 622,258 Accumulated other comprehensive income 499 158 Accumulated deficit (313,140 ) (370,212 ) Total stockholders' equity 318,722 253,360 Total liabilities and stockholders' equity $ 377,687 $ 296,557 Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ 194,420 $ 222,262 $ 228,709 90,077 102,831 103,157 56,133 68,610 82,977 52,545 58,680 58,485 — — 223,556 228 5,587 9,832 3,689 6,789 2,372 202,672 242,497 480,379 (8,252 ) (20,235 ) (251,670 ) 1,812 (17,791 ) 12,540 (6,440 ) (38,026 ) (239,130 ) 517 180 686 $ (6,957 ) $ (38,206 ) $ (239,816 ) $ (0.06 ) $ (0.33 ) $ (2.09 ) $ (0.06 ) $ (0.33 ) $ (2.09 ) 115,384 115,291 114,915 115,384 115,291 114,915 Year Ended January 1,
2011 January 2, 2010 January 3,
2009Revenue $ 297,768 $ 194,420 $ 222,262 Costs and expenses: Cost of products sold 117,943 90,077 102,831 Research and development 60,326 56,133 68,610 Selling, general and administrative 64,359 52,545 58,680 Amortization of intangible assets — 228 5,587 Restructuring charges 11 3,689 6,789 242,639 202,672 242,497 Income (loss) from operations 55,129 (8,252 ) (20,235 ) Other income (expense), net 2,474 1,812 (17,791 ) Income (loss) before provision for income taxes 57,603 (6,440 ) (38,026 ) Provision for income taxes 531 517 180 Net income (loss) $ 57,072 $ (6,957 ) $ (38,206 ) Basic net income (loss) per share $ 0.49 $ (0.06 ) $ (0.33 ) Diluted net income (loss) per share $ 0.48 $ (0.06 ) $ (0.33 ) Shares used in per share calculations: Basic 116,726 115,384 115,291 Diluted 120,143 115,384 115,291 STOCKHOLDERS’STOCKHOLDERS' EQUITY AND Common Stock
($.01 par value) Paid-in
Capital Treasury
stock Accumulated
deficit Accumulated
other
comprehensive
income (loss) Total Shares Amount 114,526 $ 1,145 $ 603,273 $ — $ (92,443 ) $ (230 ) $ 511,745 — — — — 7,210 — 7,210 — — — — (239,816 ) — (239,816 ) — — — — — (998 ) (998 ) — — — — — (150 ) (150 ) — — — — — — (233,754 ) 608 6 2,728 — — — 2,734 — — 5,497 — — — 5,497 — — 10 — — — 10 115,134 1,151 611,508 — (325,049 ) (1,378 ) 286,232 — — — — (38,206 ) — (38,206 ) — — — — — 713 713 — — — — — 132 132 — — — — — — (37,361 ) 335 4 437 — — — 441 — — 5,575 — — — 5,575 — — 52 — — — 52 115,469 1,155 617,572 — (363,255 ) (533 ) 254,939 — — — — (6,957 ) — (6,957 ) — — — — — 1,031 1,031 — — — — — (284 ) (284 ) — — — — — (56 ) (56 ) — — — — — — (6,266 ) 386 4 198 — — — 202 (263 ) (3 ) — (326 ) — — (329 ) — — 4,576 — — — 4,576 — — 238 — — — 238 115,592 $ 1,156 $ 622,584 $ (326 ) $ (370,212 ) $ 158 $ 253,360 Accumulated
other Shares Amount Paid-in
Capital Treasury stock Accumulated
deficit Total Balances, December 29, 2007 115,134 $ 1,151 $ 611,508 $ — $ (325,049 ) $ (1,378 ) $ 286,232 Net loss for 2008 — — — — (38,206 ) — (38,206 ) Unrealized gain, net, related to marketable securities and foundry investments — — — — — 713 713 Translation adjustments — — — — — 132 132 Comprehensive loss — — — — — — (37,361 ) Common stock issued in connection with exercise of stock options, ESPP and net vested RSUs 335 4 437 — — — 441 Stock-based compensation expense related to stock options, ESPP and RSUs — — 5,575 — — — 5,575 Distribution of stock held by deferred stock compensation plan — — 52 — — — 52 Balances, January 3, 2009 115,469 1,155 617,572 — (363,255 ) (533 ) 254,939 Net loss for 2009 — — — — (6,957 ) — (6,957 ) Unrealized gain, net, related to marketable securities — — — — — 1,031 1,031 Recognized gain on redemption of marketable securities, previously unrealized — — — — — (284 ) (284 ) Translation adjustments — — — — — (56 ) (56 ) Comprehensive loss — — — — — — (6,266 ) Common stock issued in connection with exercise of stock options, ESPP and net vested RSUs 386 4 198 — — — 202 Stock repurchase (263 ) (3 ) — (326 ) — — (329 ) Retirement of treasury stock — — (326 ) 326 — — — Stock-based compensation expense related to stock options, ESPP and RSUs — — 4,576 — — — 4,576 Distribution of stock held by deferred stock compensation plan — — 238 — — — 238 Balances, January 2, 2010 115,592 1,156 622,258 — (370,212 ) 158 253,360 Net income for 2010 — — — — 57,072 — 57,072 Unrealized gain, net, related to marketable securities — — — — — 581 581 Tax effect of change in fair market value of auction rate securities — — — — — (304 ) (304 ) Translation adjustments — — — — — 64 64 Comprehensive income — — — — — — 57,413 Common stock issued in connection with exercise of stock options, ESPP and net vested RSUs 2,750 27 5,341 — — — 5,368 Stock repurchase (371 ) (4 ) — (1,966 ) (1,970 ) Retirement of treasury stock — — (1,966 ) 1,966 — — — Stock-based compensation expense related to stock options, ESPP and RSUs — — 4,551 — — — 4,551 Balances, January 1, 2011 117,971 $ 1,179 $ 630,184 $ — $ (313,140 ) $ 499 $ 318,722 Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ (6,957 ) $ (38,206 ) $ (239,816 ) 14,210 21,933 26,957 — — (2,746 ) — — 223,556 2,600 20,707 — (2,958 ) — — — 233 — — — (1,604 ) 4,576 5,575 5,497 (7,147 ) 2,889 (6,748 ) 60,000 — — 6,778 7,302 (1,189 ) 322 (1,915 ) (2,426 ) 20,082 15,593 (22,891 ) 7,117 (3,840 ) (9,260 ) (1,575 ) (2,220 ) (3,488 ) 4,419 (2,292 ) 1,804 (2,525 ) 624 3,858 98,942 26,383 (28,496 ) 19,932 79,063 323,472 (8,511 ) (37,841 ) (223,332 ) — 1,658 — — — 2,249 (7,030 ) (10,128 ) (11,038 ) 4,391 32,752 91,351 — (40,000 ) (66,551 ) — 1,414 — (805 ) (4,654 ) (2,143 ) (211 ) (156 ) — (329 ) — — 413 597 2,734 (932 ) (42,799 ) (65,960 ) 102,401 16,336 (3,105 ) 53,668 37,332 40,437 $ 156,069 $ 53,668 $ 37,332 $ 1,031 $ 713 $ (998 ) $ 655 $ 1,439 $ 1,363 $ — $ 60,000 $ — Year Ended January 1,
2011 January 2,
2010 January 3,
2009 Cash flows from operating activities: Net income (loss) $ 57,072 $ (6,957 ) $ (38,206 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 14,492 14,210 21,933 Impairment of Long-term marketable securities and Other current assets — 2,600 20,707 Gain on sale of equity securities (668 ) (2,958 ) — Loss on sale of UMC common stock — — 233 Gain on sale of real estate (720 ) — — Stock-based compensation 4,551 4,576 5,575 Changes in assets and liabilities: Accounts receivable, net (7,637 ) (7,147 ) 2,889 Other receivable — 60,000 — Inventories (11,408 ) 6,778 7,302 Prepaid expenses and other current assets (3,613 ) 322 (1,915 ) Foundry advances (includes advance credits) 11,475 20,082 15,593 Accounts payable and accrued expenses (includes restructuring) 3,956 7,117 (3,840 ) Accrued payroll obligations 6,536 (1,575 ) (2,220 ) Deferred income and allowances on sales to sell-through distributors 5,532 4,419 (2,292 ) Other liabilities (257 ) (2,525 ) 624 Net cash provided by operating activities 79,311 98,942 26,383 Cash flows from investing activities: Proceeds from sales or maturities of marketable securities 54,252 19,932 79,063 Purchase of marketable securities (105,661 ) (8,511 ) (37,841 ) Proceeds from sale of UMC common stock — — 1,658 Proceeds from sale of land 871 — — Capital expenditures (13,856 ) (7,030 ) (10,128 ) Net cash (used in ) provided by investing activities (64,394 ) 4,391 32,752 Cash flows from financing activities: Extinguishment of Zero Coupon Convertible Subordinated Notes — — (40,000 ) Advances on yen line of credit — — 1,414 Payment on yen line of credit — (805 ) (4,654 ) Net share settlement upon issuance of RSUs (808 ) (211 ) (156 ) Treasury stock (1,970 ) (329 ) — Net proceeds from issuance of common stock 6,176 413 597 Net cash provided by (used in) financing activities 3,398 (932 ) (42,799 ) Net increase in cash and cash equivalents 18,315 102,401 16,336 Beginning cash and cash equivalents 156,069 53,668 37,332 Ending cash and cash equivalents $ 174,384 $ 156,069 $ 53,668 Supplemental disclosures of non-cash investing and financing activities: Unrealized gain on assets measured at fair value, net, included in Accumulated other comprehensive loss $ 581 $ 1,031 $ 713 Distribution of deferred compensation from trust assets $ 288 $ 655 $ 1,439 Tax effect of change in fair market value of auction rate securities $ (304 ) $ — $ — Non-cash exchange of Other receivable for Foundry advances and other assets $ — $ — $ 60,000 We have achieved and maintained ISO9001:2000 Quality Management Systems Certification and ISO16949:2002 Quality Systems Certification, and released a full line of PLD products qualified to the AEC-Q100 Reliability Standard.20092010 and 20072009 were 52-week years ending January 1, 2011 and January 2, 2010 and December 29, 2007,, respectively. Our fiscal 2008 was a 53-week year ending January 3, 2009. Our fiscal 20102011 will be a 52-week year and will end on January 1,December 31, 2011. All references to quarterly or yearly financial results are references to the results for the relevant fiscal period.significant intercompany balances and transactions. Certain balances in prior fiscal years have been reclassified to conform to the presentation adopted in the current year.Cash and and cash equivalents consist primarily of highly liquid investments in time deposits or money market accounts and are carried at cost. We account for marketable securities as available for sale with unrealized gains or losses recorded as Otherto Accumulated other comprehensive income (loss), unless losses are considered other-than-temporary, in which case, losses are charged to the Consolidated Statements of Operations.Disclosures” (“ASC 820”)Disclosures". The framework under the provisions of ASC 820 establishes three levels of inputs that may be used to measure fair value. Each level of input has different levels of subjectivity and difficulty involved in determining fair value. and December 29, 2007 and for the fiscal years then ended, we had no outstanding derivatives, including foreign exchange contracts for the purchase or sale of foreign currencies.ourcertain Japanese customers in yen. Gains or losses from foreign exchange rate fluctuations on balances denominated in foreign currencies are reflected in Other income (expense), net. Realized and unrealized gains or losses on foreign currency transactions were not significant for the years presented. We translate accounts denominated in foreign currencies in accordance with ASC 830, “Foreign Currency Matters” using the current rate method, under which asset and liability accounts are translated at the current rate, while stockholders’stockholders' equity accounts are translated at the appropriate historical rates. Translation adjustments related to the consolidation of foreign subsidiary financial statements are reflected in Accumulated other comprehensive income (loss) in Stockholders’Stockholders' equity.consistconsists primarily of cash and cash equivalents, marketable securities and trade receivables and supply of wafers for our new products. We place our investments primarily through three financial institutions and mitigate the concentration of credit risk by placing percentage limits on the maximum portion of the investment portfolio which may be invested in any one investment instrument. The Company’sCompany's investment policy defines approved credit ratings for investment securities. Purchased securities must meet or exceed the ratings; however, due to liquidity issues in global credit and capital markets, some of our auction rate securities have fallen below our required credit ratings during the past year. Investments consisted primarily of money market instruments, “C” or better rated auction rate securities, “AA” or better corporate notes and bonds, “AA” or better rated U. S. municipal notes, and U.S. government agency obligations. See Note 2 for a discussion of the liquidity attributes of our marketable securities.$1.2 million at January 2, 2010 and January 3, 2009,, respectively. We perform credit evaluations for essentially all customers and secure transactions with letters of credit or advance payments where appropriate. We regularly review our allowance for doubtful accounts and the aging of our accounts receivable. Write-offs for uncollected trade receivables have not been significant to date.Other receivable, Current portion of foundry advances and Foundry advances and other assets include $11.5 million and $91.6 million at January 2, 2010 and January 3, 2009, respectively, pursuant to an agreement with Fujitsu Limited (“Fujitsu”) in which we agreed to advance $125.0 million to Fujitsu for future wafer purchases. As more fully described in Note 6, we expect to receive payment of this amount in the form of advance credits from Fujitsu. The repayment obligation of Fujitsu is unsecured.generally recognized upon shipment, or in the case of sales by our sell-through distributors, at the time of reported resale, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, title has transferred, collection of resulting receivables is probable,reasonably assured, there are no customer remaining acceptance requirements and no remaining significant obligations. We sell our products directly to end customers or through a network of independent manufacturers’manufacturers' representatives and indirectly through a network of independent sell-in and sell-through distributors. Revenue and cost relating to sell-through distributor sales are deferred until either the product is sold by the distributor or return privileges terminate, at which time related distributor resale revenue, effects of distributor price adjustments, and costs are reflected in income. Our revenue reporting is highly dependent on receiving pertinent and accurate data from our distributors in a timely fashion. Distributors provide us periodic data regarding the product, price, quantity, and end customer when products are resold as well as the quantities of our products they still have in stock. We must use estimates and apply judgmentsjudgment to reconcile distributors’sell-through distributors' reported inventories to their activities. Any error in our judgment could lead to inaccurate reporting of our revenues, deferred income and allowances on sales to distributors, and net income. Revenue, from software licensing was not material for the periods presented.We enter into arrangements with certain sell-through distributors to issue accounts receivable credit adjustments (“distributor advances”) to reduce the distributors’ working capital required to service our end customers. The distributor advances are for estimated future price discounts and are recorded as a reductionCost of products sold, Deferred income and allowances on sales to sell-through distributors, and Net income (loss).These arrangementsRevenue and cost of products sold to sell-through distributors are unsecured, bear no interest,deferred until either the product is resold by the distributor or, in certain cases, return privileges terminate, at which time Revenue and Cost of products sold are settled on a quarterly basisreflected in Net income (loss). Our estimate of inventory valued at published list price and are due upon demand. The distributor advances have no impact on revenue recognition andheld by sell-through distributors with right of return totaled $16.5$50.1 million and $6.3$31.7 million at January 1, 2011 and January 2, 2010, respectively. Distributor advances totaled $26.8 million and $16.5 million at January 3, 2009,1, 2011 and January 2, 2010, respectively and are recorded in Deferred income and allowances to sell-through distributors. Deferred costs of sales related to inventory held by sell-through distributors totaled $7.6 million and $5.0 million at January 1, 2011 and January 2, 2010, respectively.we expect the majority of our revenue in fiscal 2010 will bewas from reported resale from our sell-through distributors. Resale of product by sell-through distributors as a percentage of our total revenue was 38%56%, 33%38% and 36%33% in fiscal 2010, 2009 and 2008, and 2007, respectively.flows.GoodwillAt December 29, 2007, the estimated fair value of the Company was below book value. Therefore, the Company performed an impairment test on Goodwill in accordance with ASC 350, “Intangibles—Goodwill and Other.” We calculated the impairment loss based on an allocation of the fair value of the Company’s equity to the fair value of the Company’s assets and liabilities in a manner similar to a purchase price allocation in a business combination. Fair value was based on two primary valuation methodologies: the income approach, which used the discounted cash flow method, and the market approach, which used the market capitalization method. In the allocation, goodwill was determined to have no implied fair value, and, as a result, goodwill related to the acquisition of Vantis Corporation on June 15, 1999, the acquisition of Integrated Intellectual Properties, Inc. on March 16, 2001, and the acquisition of the FPGA business of Agere Systems, Inc. on January 18, 2002 totaling $223.6 million was written off and recorded as an Impairment loss on goodwill. As a result, we no longer have Goodwill recorded on our Consolidated Balance Sheets.“Compensation—“Compensation - Nonretirement Postemployment Benefits.” For leased facilities that were vacated, an amount equal to the total future lease obligations from the date of vacating the premises through the expiration of the lease, net of any future sublease income, was recorded as a part of restructuring charges.2008 and 2007,2008, we have recorded full valuation allowances for all of our U.S. deferred tax assets due to uncertainties regarding their realization. At the end of fiscal years 2009 and 2008 we no longerWe have not recognized a valuation allowance against our foreign deferred tax assets as we believe it is more likely than not that the deferred tax assets will be realized.“Compensation—“Compensation - Stock Compensation.” The Company adopted the modified prospective transition method provided for under ASC 718. Under this transition method, compensation expense associated with stock options now includes: 1) compensation expense related to the remaining unvested portion of all stock option awards granted prior to January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of ASC 718 and 2) compensation expense related to all stock option awards granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718. In addition, the Company records compensation expense over the offering period in connection with shares issuable under the ESPP. To calculate the excess tax benefits available for use in offsetting future tax shortfalls as of the date of implementation, the Company followed the alternative transition method discussed in ASC 718. Compensation expense is reduced by actual forfeitures each quarter.LossIncome (Loss) Per Sharelossincome (loss) per share is computed based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method and the “if converted” method for convertible securities. Potentially dilutive securities consist of stock options, restricted stock units (“RSUs”), warrants to purchase common stock and Zero Coupon Convertible Subordinated Notes (“Convertible Notes”).net lossNet income (loss) per share is presented below (in thousands, except per share data): Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ (6,957 ) $ (38,206 ) $ (239,816 ) 115,384 115,291 114,915 — — — 115,384 115,291 114,915 $ (0.06 ) $ (0.33 ) $ (2.09 ) $ (0.06 ) $ (0.33 ) $ (2.09 ) Year Ended January 1,
2011 January 2,
2010 January 3,
2009Basic and diluted Net income (loss) $ 57,072 $ (6,957 ) $ (38,206 ) Shares used in basic Net income (loss) per share 116,726 115,384 115,291 Dilutive effect of stock options, RSUs and ESPP shares 3,417 — — Shares used in diluted Net income (loss) per share 120,143 115,384 115,291 Basic Net income (loss) per share $ 0.49 $ (0.06 ) $ (0.33 ) Diluted Net income (loss) per share $ 0.48 $ (0.06 ) $ (0.33 ) 2008 and 20072008 excludes the effects of stock options, RSUs and warrantsESPP shares aggregating 13.1 million 20.4 million and 22.120.4 million shares, respectively, because the effect was antidilutive. Stock options, RSUs, ESPP shares and warrants are antidilutive when the aggregate of exercise price, unrecognized stock-based compensation expense and excess tax benefitbenefits are greater than the average market price for our common stock during the period.and 5.1 million shares for fiscal years 2008 and 2007, respectively, are excluded from the computation of diluted earnings per share, as the effect was antidilutive. There were no outstanding Convertible Notes during fiscal 2010 and 2009.Loss For fiscal 2007, comprehensive loss consists primarily of net loss of $239.8 million and a $1.0 million unrealized loss related to marketable securities and foundry investments.$0.3$0.6 million, $0.5$0.3 million and $0.5 million in fiscal years 2010, 2009 2008 and 2007,2008, respectively. Interest paid was insignificant for all periods presented.the Company reflectswe reflect multiple-element arrangements entered into subsequent to January 1, 2011, in the financial statements.disclosuresdisclosure requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in andThe Company doesWe do not anticipate that the adoption of this statement will materially expand itsour consolidated financial statement footnote disclosures. January 2,
2010 January 3,
2009 $ 8,471 $ 12,241 — 5,333 12,743 13,233 196 919 12,939 19,485 $ 21,410 $ 31,726 January 1,
2011 January 2,
2010Short-term marketable securities: $ 63,836 $ 8,471 Long-term marketable securities: Due after ten years 10,232 12,743 No contractual maturity date — 196 10,232 12,939 $ 74,068 $ 21,410 January 2,
2010 January 3,
2009 $ 8,471 $ 7,221 — 5,020 8,471 12,241 12,743 13,233 — 5,333 196 919 12,939 19,485 $ 21,410 $ 31,726 January 1,
2011 January 2,
2010Short-term marketable securities: Corporate and government bonds, notes and commercial paper $ 63,836 $ 8,471 Long-term marketable securities: Auction Rate Securities (by type of underlying asset): Federally insured or FFELP guaranteed student loans 10,232 12,743 Auction market preferred shares — 196 10,232 12,939 $ 74,068 $ 21,410 January 2, 2010 January 3, 2009 Par
Value Fair
Value S&P
Credit
rating Par
Value Fair
Value S&P
Credit
rating $ 15,725 $ 12,743 AAA $ 16,875 $ 13,233 AAA — — — 14,000 5,333 BBB, A- 8,325 196 C 8,325 919 BBB $ 24,050 $ 12,939 $ 39,200 $ 19,485 At January 2, 2010 and January 3, 2009, the Company held auction rate securities with a face value of $24.1 million and $39.2 million, respectively. January 1, 2011 January 2, 2010 Par Value Fair Value S&P
Credit
rating Par Value Fair Value S&P
Credit
ratingLong-term marketable securities: Federally-insured student loans $ 11,600 $ 10,232 AAA $ 15,725 $ 12,743 AAA Ambac Assurance Corporation — — - 8,325 196 C $ 11,600 $ 10,232 $ 24,050 $ 12,939 2, 2010,1, 2011, the Company accepted eight13 partial redemptions ranging from 40% to 100% ofat par value of auction rate securities. TheOn July 29, 2010, the Company intends to sell itssold student loan auction rate securities, as marketswith a par value of $3.8 million and fair value of $2.9 million for these securities resume or offers become available.$3.3 million and reported a gain of $0.4 million. On December 9, 2010, the Company sold auction market preferred shares issued by AMBAC Assurance Corporation with a par value of $8.3 million and a fair value of $0.2 million for $0.5 million and reported a gain of $0.3 million. At January 2, 2010,1, 2011, due to continued multiple failed auctions and a determination of illiquidity, the $24.1$11.6 million par value of auction rate securities held by the Company had an estimated fair value of $12.9$10.2 million and are classified as Long-term marketable securities. At January 3, 2009, the fair value ofThese auction rate securities held by the Company and classified as Long-term marketable securities was $19.5 million.Long-term marketable securities with a par value of $15.7 million (estimated fair value of $12.7 million) are exposed to risks associated with student loan asset-backed notes. Such loans are insured by the federal government or guaranteed by the Federal Family Educational Loan Program (“FFELP”). Long-term marketable securities with a par value of $8.3 million (estimated fair value of $0.2 million) were replaced on December 3, 2008 by auction market preferred shares issued by Ambac Assurant Corporation (“AMBAC”), as a result of AMBAC exercising their put option feature provided in this security. On August 1, 2009, AMBAC discontinued paying monthly dividends onProgram. The Company intends to sell its auction market preferred shares, which reduced interest income included in Other income (expense), net, by less than $0.1 million per quarter.While the auctions for auction rate securities have historically provided a liquid marketas markets for these securities due to liquidity issues in global credit and capital markets, auction rate securities held by us have experienced multiple failed auctions (a portion beginning in October 2007). These instruments are considered illiquid and have been reclassified as Long-term marketable securities on the Consolidated Balance Sheets. Due to the severity of the decline in fair value, the duration of the decline, and the downgrading of the credit ratings on some of the securities, the Company determined that an other-than-temporary decline in fair value had occurred, and recorded additional impairment charges of $2.6 million for the fiscal year ended January 2, 2010. If we were to liquidate our position in these securities, the amount realized could be materially different than the estimated fair value amounts at which we are carrying these securities and there could be a materially detrimental effect on our financial results. Fair value measurements as of January 2, 2010 Total Level 1 Level 2 Level 3 $ 8,471 $ 8,471 $ — $ — 12,939 — — 12,939 $ 21,410 $ 8,471 $ — $ 12,939 Fair value measurements as of January 1, 2011 Total Level 1 Level 2 Level 3 Short-term marketable securities $ 63,836 $ 63,836 $ — $ — Long-term marketable securities 10,232 — — 10,232 $ 74,068 $ 63,836 $ — $ 10,232 For ourLevel 1 assets, we utilizedinstruments generally represent quoted prices in active markets. Therefore, determining fair value for Level 1 instruments generally does not require significant management judgment, and the estimation is not difficult. Our Level 1 instruments consist of federal agency, municipal or corporate notes and bonds, and commercial paper that are traded in active markets and are classified as Short-term marketable securities on our Consolidated Balance Sheet.assets. As a resultinstruments in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of failed auctions on ourthe assets or liabilities. We have no investments in Level 2 instruments.quoted prices in active markets are not readily available for our auction rate securities, and thusclassified as Level 3data is used for valuation purposes. For ourLevel 3assets, we employed instruments. Management uses a combination of the servicesmarket and income approach to derive the fair value of a valuation firm that specializes in valuing illiquid assets. In addition, we collect other available market information regarding auction rate securities, which include third party valuation results, investment broker provided market information and available information on the credit quality of the underlying collateral. As a result, the determination of fair value for Level 3 instruments requires significant management judgment and subjectivity. Our Level 3 instruments are classified as Long-term marketable securities on our Consolidated Balance Sheet.2, 2010,1, 2011, the following changes occurred in ourLevel 3assets (in thousands): Year Ended January 2,
2010 January 3,
2009 $ 19,485 $ 44,900 (6,304 ) (5,700 ) (242 ) (19,715 ) $ 12,939 $ 19,485 Year Ended January 1, 2011 January 2, 2010 Beginning fair value of Long-term marketable securities $ 12,939 $ 19,485 Fair value of securities sold or redeemed (4,147 ) (6,304 ) Temporary or other-than-temporary fluctuations in fair value 1,440 (242 ) Ending fair value of Long-term marketable securities $ 10,232 $ 12,939 “Investments—“Investments - Debt and Equity Securities,” the Company recorded an unrealized loss of less than $0.1 million during the year ended January 2, 20101, 2011 on certain Short-term marketable securities (Level 1 instruments) which has been recorded in Accumulated other comprehensive income (loss).income. Future fluctuations in fair value related to these instruments that the Company deems to be temporary, including any recoveries of previous write-downs, would be recorded to Accumulated other comprehensive loss.income. For the year ended January 2, 2010,1, 2011, approximately $1.0$0.7 million in unrealized gains were recorded in Accumulated other comprehensive income (loss).income. If the Company were to determine in the future that any further decline in fair value is other-than-temporary, we would record an impairment charge, which could have a materially detrimental impact on our operating results. If we were to liquidate our position in these securities, it is likely that the amount of any future realized gain or loss would be different from the unrealized gain or loss reported in Accumulated other comprehensive income (loss). January 2,
2010 January 3,
2009 $ 15,046 $ 22,167 10,879 10,536 $ 25,925 $ 32,703 January 1,
2011 January 2,
2010Work in progress $ 25,516 $ 15,046 Finished goods 11,817 10,879 $ 37,333 $ 25,925 January 2,
2010 January 3,
2009 $ 1,456 $ 1,456 27,972 27,972 143,750 141,197 9,921 9,735 13,612 13,365 196,711 193,725 (160,204 ) (153,418 ) $ 36,507 $ 40,307 January 1,
2011 January 2,
2010Land $ 1,456 $ 1,456 Buildings 27,672 27,972 Computer and test equipment 151,940 143,750 Office furniture and equipment 9,149 9,921 Leasehold and building improvements 13,842 13,612 204,059 196,711 Accumulated depreciation and amortization (164,737 ) (160,204 ) $ 39,322 $ 36,507 $13.4 million and $13.5$13.4 million for fiscal years 2010, 2009, and 2008, and 2007, respectively.—Foundry Advances and Other Assets (in thousands): January 2,
2010 January 3,
2009 $ 15,115 $ 39,237 (11,475 ) (19,157 ) $ 3,640 $ 20,080 The Company has an Advance Payment and Purchase Agreement (“the Agreement”), with Fujitsu Limited (“Fujitsu”), pursuant to which we advanced $125.0 million in support of the development and construction of a 300mm wafer fabrication facility in Mie, Japan. As of March 31, 2007, we had completed the unsecured advance payments.During the third quarter of fiscal 2006 and third quarter of fiscal 2007, the Company entered into amendments (“Amendments”) to the Agreement, prior to which our $125.0 million advance was to be credited against the purchase price of 300mm wafers received from Fujitsu. The Amendments permit us to also credit the advance against the purchase price of 200mm wafers and other services (collectively, wafer credits and other services are referred to as “advance credits”), including engineering mask set charges.Under the terms of a letter agreement between the Company and Fujitsu, Fujitsu agreed to repay in cash to the Company $60.0 million (recorded as Other receivable in the Consolidated Balance Sheet at January 3, 2009), plus interest, which was received in fiscal 2009 on the outstanding portion of the Advance Payment made by us to Fujitsu under the terms of the Agreement. In addition, we expect to receive the remaining advance of approximately $11.5 million in the form of advance credits, including engineering mask set charges, by the end of the second quarter of the Company’s fiscal year 2010.All other terms and conditions of the Agreement remain in full force and effect until repayment of the advance payment in full. The repayment obligation of Fujitsu is unsecured.(7)—Intangible Assets and Goodwill:2, 2010,1, 2011, purchased intangible assets related to current technology and licenses and Goodwill were fully amortized, or in the case of Goodwill, fully impaired.2008 and $9.8 million in 2007.2008. Under the guidance of ASC 350, “Intangibles—“Intangibles - Goodwill and Other (“ASC 350”),” the Company evaluates the remaining useful life and recoverability of equipment and other assets, including intangible assets with definite lives, whenever events or changes in circumstances require us to do so. At January 3, 2009, we concluded that Intangible assets were not impaired. At January 2, 2010, we no longer have Intangible assets recorded on our Consolidated Balance Sheets.At December 29, 2007, the estimated fair value of the Company was below book value. Therefore, the Company performed an impairment test on Goodwill in accordance with ASC 350. We calculated the impairment loss based on an allocation of the fair value of the Company’s equity to the fair value of the Company’s assets and liabilities in a manner similar to a purchase price allocation in a business combination. Fair value was based on two primary valuation methodologies: the income approach, which used the discounted cash flow method, and the market approach, which used the market capitalization method. In the allocation, goodwill was determined to have no implied fair value, and, as a result, goodwill related to the acquisition of Vantis Corporation on June 15, 1999, the acquisition of Integrated Intellectual Properties, Inc. on March 16, 2001, and the acquisition of the FPGA business of Agere Systems, Inc. on January 18, 2002 totaling $223.6 million was written off and recorded as an Impairment loss on goodwill. As a result, we no longer have Goodwill recorded on our Consolidated Balance Sheets.(8)(9)2014.2016. Rental expense under the operating leases was $2.7 million, $3.0 million $3.8 million and $5.4$3.8 million for fiscal years 2010, 2009 2008 and 2007,2008, respectively. Future minimum lease commitments at January 2, 20101, 2011 are as follows (in thousands): Amount $ 4,080 3,593 2,942 2,750 480 — $ 13,845 (10)Fiscal year Amount 2011 $ 3,831 2012 3,099 2013 2,802 2014 526 2015 39 Thereafter 25 $ 10,322 2008, and 20072008 are presented in the following table (in thousands): Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ 74 $ (145 ) $ (107 ) 55 50 33 377 268 729 506 173 655 — — — — — — 11 7 31 11 7 31 $ 517 $ 180 $ 686 Year Ended January 1,
2011 January 2,
2010 January 3,
2009Current: Federal $ 83 $ 74 $ (145 ) State 47 55 50 Foreign 880 377 268 1,010 506 173 Deferred: Federal (296 ) — — State (8 ) — — Foreign (175 ) 11 7 (479 ) 11 7 Provision for income taxes $ 531 $ 517 $ 180 Year Ended January 2,
2010 January 3,
2009 December 29,
2007 % % % $ (2,254 ) 35 $ (13,309 ) 35 $ (83,697 ) 35 (726 ) 11 (2,063 ) 5 (3,319 ) 1 (899 ) 14 (920 ) 2 (1,258 ) — (476 ) 7 3 — 184 — 860 (13 ) 729 (2 ) 82 — (94 ) 1 13,132 (34 ) 77,240 (32 ) 412 (6 ) 131 — 43 — — — — — 8,040 (3 ) — — — — 583 — 2,086 (32 ) 2,412 (6 ) 2,410 (1 ) 1,386 (22 ) (266 ) 1 — — 222 (3 ) 331 (1 ) 378 — $ 517 (8 ) $ 180 — $ 686 — Year Ended January 1,
2011 January 2,
2010 January 3,
2009 % % % Computed income tax provision (benefit) at the statutory rate $ 20,161 35 $ (2,254 ) 35 $ (13,309 ) 35 Adjustments for tax effects of: State taxes, net (122 ) (0 ) (726 ) 11 (2,063 ) 5 Research and development credits (1,451 ) (2 ) (899 ) 14 (920 ) 2 Foreign taxes 203 0 (476 ) 7 3 0 Foreign dividends 174 0 860 (13 ) 729 (2 ) Valuation allowance (21,303 ) (37 ) (94 ) 1 13,132 (34 ) Change in uncertain tax benefit accrual 268 0 412 (6 ) 131 0 Stock-based compensation — — 2,086 (32 ) 2,412 (6 ) Tax rate change 2,660 5 1,386 (22 ) (266 ) 1 Other (59 ) (0 ) 222 (3 ) 331 (1 ) Provision for income taxes $ 531 1 $ 517 (8 ) $ 180 0 2, 20101, 2011, the net deferred tax asset relates to foreign jurisdictions where we have concluded it is more likely than not that we will realize the net deferred tax assets in future periods. The net decrease in the total valuation allowance affecting the effective tax rate for the year ended January 2, 20101, 2011 was less than $0.1approximately $21.3 million.Company’sCompany's distribution center changeschanged the sourcing of sales for state taxation purposes. This change reducesreduced the taxable income/income (loss) sourced to Oregon and therefore reducesreduced the Company’sCompany's effective tax rate. Due to changes in projected worldwide income and anticipated tax elections in California, the Company has further reduced its effective state tax rate. The Company’sCompany's 2010 and 2009 deferred tax assets have been reduced by $2.8 million and $1.4 million, respectively, to reflect the decrease in future tax benefit of its net deferred tax asset. The income tax expense associated with the reduction of the net deferred tax asset during 2010 and 2009 has been reflected withinin the rate reconciliation with an offsetting adjustmentadjustments to the valuation allowance. January 2,
2010 January 3,
2009 $ 1,914 $ 1,458 4,535 3,983 9,843 4,499 2,678 3,216 90,867 109,362 3,377 2,107 146,707 136,205 26,717 25,074 2,800 — 4,769 7,814 13 12 294,220 293,730 (292,683 ) (292,752 ) 1,537 978 796 694 624 166 1,420 860 $ 117 $ 118 January 1,
2011 January 2,
2010Deferred tax assets: Accrued expenses and reserves $ 3,843 $ 1,914 Inventory 4,396 4,535 Deferred revenue 15,326 9,843 Stock-based and deferred compensation 2,731 2,678 Intangible assets 71,891 90,867 Fixed assets 1,266 3,377 Net operating loss carryforward 137,387 146,707 Tax credit carryforward 29,095 26,717 Capital loss carryforward 6,106 2,800 Unrealized loss on securities 1,042 4,769 Other — 13 273,083 294,220 Less: valuation allowance (271,208 ) (292,683 ) Net deferred tax assets 1,875 1,537 Deferred tax liabilities: Prepaid expenses 732 796 Other 849 624 Total deferred tax liabilities 1,581 1,420 Net deferred tax assets $ 294 $ 117 2, 2010,1, 2011, we have federal net operating loss carryforwards (pre-tax) of approximately $379.4$356.1 million that expire at various dates between 20212022 and 2029.2030. We have state net operating loss carryforwards (pre-tax) of approximately $187.5$185.0 million that expire at various dates from 20102011 through 2029. We also have federal and state credit carryforwards of $31.4$34.4 million, $17.9$22.1 million of which do not expire, with the remainder expiring at various dates from 20102011 through 2029.$0.4$0.3 million of the undistributed earnings of our Chinese subsidiary. We intend to reinvest these earnings indefinitely in our Chinese subsidiary. If these earnings were distributed to the U.S. in the form of dividends or otherwise, we would be subject to additional U.S. income taxes and foreign withholding taxes.Effective December 31, 2006, we adopted ASC 740-10, “Accounting for Uncertainty in Income Taxes.” As a result of the requirements under ASC 740-10 relating to the recognition and measurement of uncertain tax positions, we recognized as a cumulative effect adjustment, a decrease in Other long-term liabilities of $8.6 million, an increase in Accounts payable and accrued expenses of $1.4 million and a reduction in Accumulated deficit of $7.2 million. the date of adoption, our unrecognized tax benefits, exclusive of associated interest and penalties, totaled $4.3 million, of which $4.1 million, if recognized, would affect the effective tax rate. At the date of adoption, interest and penalties associated with unrecognized tax benefits were $0.6 million.At 2, 2010,1, 2011, our unrecognized tax benefits associated with uncertain tax positions were $7.0$7.7 million, of which $6.8$7.5 million, if recognized, would affect the effective tax rate. As of January 2, 2010,1, 2011, interest and penalties associated with unrecognized tax benefits were $0.9$1.0 million. 2008 and 20072008 (in thousands): Amount $ 4,308 692 368 (224 ) (189 ) (15 ) 4,940 727 924 (235 ) — (118 ) 6,238 473 341 — — (83 ) $ 6,969 Unrecognized tax benefit Amount Balance at December 30, 2007 $ 4,940 Additions based on tax positions related to the current year 727 Additions based on tax positions of prior years 924 Reduction for tax positions of prior years (235 ) Settlements — Reduction as a result of lapse of applicable statute of limitations (118 ) Balance at January 3, 2009 6,238 Additions based on tax positions related to the current year 473 Additions based on tax positions of prior years 341 Reduction for tax positions of prior years — Settlements — Reduction as a result of lapse of applicable statute of limitations (83 ) Balance at January 2, 2010 6,969 Additions based on tax positions related to the current year 786 Additions based on tax positions of prior years 60 Reduction for tax positions of prior years — Settlements — Reduction as a result of lapse of applicable statute of limitations (74 ) Balance at January 1, 2011 $ 7,741 2, 2010,1, 2011, it is reasonably possible that $1.5 million of unrecognized tax benefits and $0.8$1.0 million of associated interest and penalties could significantly change during the next twelve months. The $2.3$2.5 million potential change would represent a decrease in unrecognized tax benefits, comprised of items related to matters currently inbeing litigated with the IRS, appeals, certain federal and state credits and uncertain income tax positions related to foreign tax filings for years no longer subject to examination under expiring statutes of limitations.February 17, 2009, The American RecoveryDecember 16, 2010 the Tax Relief, Unemployment Insurance Reauthorization and ReinvestmentJob Creation Act of 20092010 was signed into law. This act extends the election to foregoprovides for additional bonus depreciation and accelerate certain unutilized income tax credits in 2009. The Company recorded an income tax benefit of $0.3 million during 2009 related toextends the acceleration of its research tax credit.arefunds of $0.1 million refundand $0.1 million, respectively, of previously paid taxes in the People’sPeople's Republic of China. The refund wasThese refunds were granted due to specific development activities conducted within the People’sPeople's Republic of China.auditexamination in Taiwan.Taiwan and Canada. To date, there are no proposed adjustments that are expected to have a material adverse effect on our results of operations.20062007 for federal income taxes, 20052006 for state income taxes, and 20032004 for foreign income taxes, including years ending thereafter. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carry forward amount.(11) the third quarter of fiscal 2009, the Companywe initiated a restructuring plan (“("2009 restructuring plan”plan") to lower operating expenses primarily by reducing headcount, reducing occupancy in certain leased facilities and to transfer inventory management, order fulfillment, and direct sales logistics from itsour headquarters in Oregon to a third party contractor in Singapore. The Company recorded a restructuring charge of severance and lease related costs of $3.0 million in connection with the 2009 restructuring plan. The 2009 restructuring plan was substantially completed in the fourth quarter of fiscal 2009.During December 2009, the Company adopted a restructuring plan (“December 2009 restructuring plan”) under whichIn addition, the Company established an operations center in Singapore. The Company will beginSingapore to transfer some of its supply chain activities from the Company’s headquarters in Oregon to the new operations center in Singapore in 2010. The Company recorded a restructuring charge of severance and related costs of $0.8 million in connection with the December 2009 restructuring plan. The December 2009 restructuring plan will be substantially completed by the fourth quarter of fiscal 2010.components—components - a streamlining of research and development sites, a voluntary separation program for certain employees and an organizational consolidation within the Company’sCompany's largest design center.2, 2010,1, 2011, the Consolidated Balance Sheet included $1.9$0.9 million primarily related to operating lease commitments and severance and related expenses accrued under the provisions of the 2009 and December 2009 restructuring plans.plan. In addition, the Consolidated Balance Sheet included $0.3 million related to operating lease commitments accrued under the provisions of the 2005 restructuring plan. Balance at
January 3,
2009 Charged to
expense in
fiscal 2009 Paid or
settled Adjustments
to reserve
credited to
expense in
fiscal 2009 Balance at
January 2,
2010 Cumulative
expense
through year
ended
January 3, 2009 Aggregate
expense and
adjustments $ — $ 2,384 $ (1,653 ) $ (16 ) $ 715 $ — $ 2,368 — 1,357 (188 ) — 1,169 — 1,356 — 31 (18 ) — 13 — 31 — 3,772 (1,859 ) (16 ) 1,897 — 3,755 683 (28 ) (277 ) (39 ) 339 21,406 21,339 $ 683 $ 3,744 $ (2,136 ) $ (55 ) $ 2,236 $ 21,406 $ 25,094 Balance at
January 2,
2010 Charged to
expense in
fiscal 2010 Paid or
settled Adjustments
to reserve credited to expense in fiscal 2010 Balance at
January 1,
2011 Cumulative expense
through year ended
January 2, 2010 Aggregate
expense and
adjustments2009 Restructuring Plan: Severance and related costs $ 715 $ 198 $ (443 ) $ (295 ) $ 175 $ 2,368 $ 2,271 Lease loss reserve 1,169 50 (532 ) 57 744 1,356 1,463 Other 13 — — — 13 31 31 Subtotal 1,897 248 (975 ) (238 ) 932 3,755 3,765 Pre-2009 Restructuring Plans: Lease loss reserve and other 339 1 (70 ) — 270 21,339 21,340 Total restructuring plans $ 2,236 $ 249 $ (1,045 ) $ (238 ) $ 1,202 $ 25,094 $ 25,105 2008 and 20072008 were as follows (in thousands): Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ 2,334 $ 4,996 $ 2,403 1,358 1,545 (173 ) (3 ) 248 142 $ 3,689 $ 6,789 $ 2,372 Year Ended January 1,
2011 January 2,
2010 January 3,
2009Severance and related costs $ (97 ) $ 2,334 $ 4,996 Lease loss reserve 108 1,358 1,545 Other — (3 ) 248 $ 11 $ 3,689 $ 6,789 (12)Notes due in 2010:(13)the Company’sour Board of Directors approved a stock repurchase program pursuant to which up to $20.0 million of outstanding common stock may be repurchased from time to time.could have been repurchased. In connection with the stock repurchase program, we entered into a 10b5-1 plan. The duration of the repurchase program was twelve months, and expired on December 13, 2009. During fiscal 2009, approximately 263,000 shares were repurchased for $0.3 million, all of which were open market transactions and were funded from available working capital. ThereAll shares repurchased under this program were no purchasesretired in fiscal 2008.(14)2010.Stockholders’Stockholders' Equity:Stock WarrantsWarrants (last issued in fiscal year 2004) for 294,579, 256,661 and 119,074 shares expired unexercised during fiscal years 2009, 2008 and 2007, respectively. There are no outstanding warrants as of January 2, 2010. Expense recorded in conjunction with the vesting of warrants was not material to our Consolidated Financial Statements for fiscal years 2009, 2008 and 2007.Company’sCompany's employee stock option plans include principal plans adopted in 1996 and 2001 (“principal option plans”), as well as various stock option plans assumed through acquisitions under which stock options are outstanding. We have authorized an aggregate of 9,000,000 and 17,200,000 shares of common stock for issuance to officers and employees under the 2001 plan and 1996 plan, respectively. The principal option plans provide for grants of options to employees to purchase common stock at the fair market value of such shares on the grant date. The options generally vest quarterly over a four-year period beginning on the grant date. Options granted under the principal option plans are generally non-qualified stock options but the principal option plans permit some options granted to qualify as “incentive stock options” under the U.S. Internal Revenue Code. The contractual term of options granted prior to January 31, 2006 was generally ten years, while the contractual term of options granted subsequent to January 31, 2006 is generally seven years.Company’sCompany's equity compensation practices for employees who receive equity grants. The RSUs granted to employees generally vest quarterly over a four-year period beginning on the grant date.Company’sCompany's director stock option plan, which was amended and approved most recently by our stockholders in May 2007, provides that non-employee members of our Board of Directors receive non-qualified option grants in set amounts and at set times, at option prices equal to the fair market value on the date of grant. An increase of 200,000 shares reserved forCompany’sCompany's ESPP, which was amended and approved most recently by our stockholders in May 2007, permits eligible employees to purchase shares of common stock through payroll deductions, not to exceed 10% of an employee’semployee's compensation. The purchase price of the shares is the lower of 85% of the fair market value of the stock at the beginning of each six-month offering period or 85% of the fair market value at the end of such period, but in no event less than the book value per share at the mid-point of each offering period. An aggregate of 5,500,000 shares of common stock have been authorized for issuance under the plan. We have treated the ESPP as a compensatory plan, and recorded compensation expense related to the ESPP of $0.3$0.4 million and $0.5$0.3 million for fiscal 20092010 and fiscal 2008,2009, respectively. Year Ended January 2,
2010 January 3,
2009 December 29,
2007 $ 353 $ 422 $ 483 1,572 2,467 2,741 2,651 2,433 2,273 — 253 — $ 4,576 $ 5,575 $ 5,497 Year Ended Line item: January 1,
2011 January 2,
2010 January 3,
2009Cost of products sold $ 312 $ 353 $ 422 Research and development 1,851 1,572 2,467 Selling, general and administrative 2,388 2,651 2,433 Restructuring charges — — 253 $ 4,551 $ 4,576 $ 5,575 Actual forfeitures occurring during a period are accounted for at that time.SEC’sSEC's Staff Accounting Bulletin No. 107. The Company now believes that it has sufficient internal historical data to refine the expected term assumption. As such, the expected term computation is based on historical vested option exercises and post-vest forfeiture patterns and includes an estimate of the expected term for options that were fully vested and outstanding at January 3, 2009 for each of the two populations identified. The expected volatility of both stock options and ESPP shares is based on the daily historical volatility of our stock price, measured over the expected term of the option or the ESPP purchase period. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term closest to the expected term of the option. The dividend yield reflects that we have not paid any cash dividends since inception and do not intend to pay any cash dividends in the foreseeable future. Year Ended January 2,
2010 January 3,
2009 December 29,
2007 51.5 to 54.8 46.2 to 48.3 46.6 to 55.4 1.65 to 2.66 2.0 to 3.3 3.3 to 4.8 4.00 to 4.51 4.75 4.75 0% 0% 0% 71.0 46.0 48.0 0.3 3.3 5.1 0.50 0.50 0.50 0% 0% 0% Year Ended January 1,
2011 January 2,
2010 January 3,
2009Employee and Director Stock Options Expected volatility (%) 55.1 to 61.6 51.5 to 54.8 46.2 to 48.3 Risk-free interest rate (%) .78 to 2.47 1.65 to 2.66 2.0 to 3.3 Expected term (in years) 4.06 to 4.43 4.00 to 4.51 4.75 Dividend yield 0 % 0 % 0 % Employee Stock Purchase Plan Weighted average expected volatility (%) 52.3 71.0 46.0 Weighted average risk-free interest rate (%) 0.2 0.3 3.3 Expected term (in years) 0.50 0.50 0.50 Dividend yield 0 % 0 % 0 % 2, 2010,1, 2011, there was $8.6$7.2 million of total unrecognized compensation cost related to unvested employee and director stock options, which is expected to be recognized over a weighted average period of 2.12.7 years. Our current practice is to issue new shares to satisfy option exercises. Compensation expense for all stock-based compensation awards is recognized using the straight-line method.Company’sCompany's Board of Directors approved an offer to exchange stock options to purchase up to an aggregate of 7,875,084 shares of the Company’sCompany's common stock that were previously granted with an exercise price equal to or greater than $3.91 under the Company’sCompany's 1996 Stock Incentive Plan (“the 1996 Plan”) and the Company’sCompany's 2001 Stock Plan (“the 2001 Plan”), for new options issuable under the 1996 Plan or new RSUs issuable under the 2001 Plan. The offer was not extended to the Company’sCompany's executive officers, members of the board of directors or employees based outside the United States. The offer expired on February 3, 2009 at which time the exchange was consummated. Approximately 300 eligible option holders elected to participate in the exchange and the Company accepted for cancellation options to purchase an aggregate of 3,571,228 shares of the Company’sCompany's common stock under the 1996 Plan and options to purchase an aggregate of 2,493,826 shares under the 2001 Plan. These shares are included in the Forfeited, expired or exchanged line in the table below. Subject to the terms and conditions of the exchange offer, the Company granted new options to purchase up to an aggregate of 727,537 shares of the Company’sCompany's common stock under the 1996 Plan and 227,412 RSUs under the 2001 Plan. These shares are included in the Granted line in the table below. The stock-based compensation expense impact for the exchange was approximately $0.4 million and is being amortized over four years from the date of exchange.2, 20101, 2011 (shares and aggregate intrinsic value in thousands): Shares Weighted
average
exercise
price Weighted
average
remaining
contractual
term
(years) Aggregate
Intrinsic
Value 15,441 $ 5.57 5,587 1.85 (100 ) 1.73 (8,491 ) 7.11 12,437 $ 2.88 12,437 $ 2.88 5.84 $ 5,864 3,746 $ 4.60 4.72 $ 294 Shares Weighted
average
exercise price Weighted average
remaining
contractual term
(years) Aggregate
Intrinsic ValueBalance, January 2, 2010 12,437 $ 2.88 Granted 1,614 5.00 Exercised (2,110 ) 2.46 Forfeited or expired (2,068 ) 2.63 Balance, January 1, 2011 9,873 $ 3.38 Vested and expected to vest at January 1, 2011 9,873 $ 3.38 5.27 $ 27,575 Exercisable, January 1, 2011 4,269 $ 4.12 4.36 $ 9,362 Company’sCompany's closing stock price on the last trading day of eachthe fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that day. This amount changes based on the fair market value of the Company’sCompany's stock. Total intrinsic value of options exercised for fiscal 2010, 2009 and 2008 and 2007 was $5.3 million, less than $0.1 million $0.1 million and $0.2less than $0.1 million, respectively. The total fair value of options and RSUs vested and expensed in fiscal 2010, 2009 and 2008 and 2007 was $4.2 million, $4.3 million and $4.8 million, and $5.0 million, respectively.$1.05,$2.31, $1.05 and $2.61$1.05 for fiscal years 2010, 2009 2008 and 2007,2008, respectively. The weighted average fair values calculated using the Black-Scholes option pricing model for the ESPP were $1.07, $.66 $.88 and $1.46$.88 for fiscal years 2010, 2009 and 2008, and 2007, respectively.2, 20101, 2011 (shares in thousands): Shares Weighted
average
grant
date fair
value 592 $ 3.93 704 1.89 (286 ) 3.69 (85 ) 3.16 925 $ 2.52 Shares Weighted
average grant
date fair valueBalance, January 2, 2010 925 $ 2.52 Granted — — Vested (460 ) 2.65 Forfeited (42 ) 2.22 Balance at January 1, 2011 423 $ 2.42 2, 2010,1, 2011, there was $3.4$1.0 million of total unrecognized compensation cost related to unvested RSUs. Our current practice is to issue new shares when RSUs vest. Compensation expense for RSUs is recognized using the straight-line method over the related vesting period.2, 2010,1, 2011, a total of 12.212.6 million shares of our common stock were available for future grants under our stock option plans. Shares subject to stock option grants that expire or are cancelledcanceled without delivery of such shares generally become available for re-issuance under these plans. At January 2, 2010,1, 2011, a total of 0.70.3 million shares of our common stock were available for future purchases under our ESPP.(15)Profit Sharing PlanWe initiated a profit sharing plan effective April 1, 1990. Under the provisions of this plan, as approved by the Board of Directors, a percentage of our operating income, as defined and calculated at the end of March and September for the prior six-month period, is paid to qualified employees. There was no expense recorded related to the profit sharing plan in fiscal years 2009, 2008 or 2007. This plan was terminated in 2008.Company’sCompany's common stock. The plan allows for the Company to make discretionary matching contributions in cash. The Company matched contributions for a total of $0.2 million in fiscal 2010 and made no matching contributions in fiscal 2009 or fiscal 2008 and $1.5 million in matching contributions in fiscal 2007.$0.7$0.3 million, $1.4$0.7 million and $1.4 million of the deferred compensation balance in fiscal 2010, 2009 2008 and 2007,2008, respectively. Balances at January 1, 2011 and January 2, 2010 of $0.7 and January 3, 2009 of $1.0 million and $1.5 million, respectively, are reflected in Other long-term liabilities in our accompanying Consolidated Balance Sheets and the related assets are included in Foundry advances and other assets in our accompanying Consolidated Balance Sheets. The deferred compensation amounts are unsecured obligations, but we have made corresponding contributions to a trust fund owned by the Company for the benefit of deferred compensation plan participants. The trust fund invests in mutual funds in the manner directed by participants pursuant to provisions of the plan. The mutual funds are accounted for as trading securities and are marked to market.Company’sCompany's Chief Executive Officer and other members of senior management as nominated by the Chief Executive Officer and approved by the Compensation Committee are eligible to participate in the Executive Variable Compensation Plan. The payout for each participant is based both on Company performance, as measured by achievement of revenue and operating income performance goals approved by the Board prior to the commencement of the plan year, and individual performance. There was no expense under this plan during fiscal years 2010, 2009 2008 or 2007.Company’sCompany's officers, including executive officers, upon the achievement of specific performance criteria for the 2009 fiscal year. The plan essentially replaced the prior profit sharing plan that terminated in fiscal 2008. There was no expense recorded under this plan during fiscal 2009.chief executive officer,Chief Executive Officer, other executive officers, and other members of senior management, including vice presidents and director-level employees, together with all other employees of the Company, are eligible to participate in the 2010 Plan. Under the 2010 Plan, individual cash incentive payments for the chief executive officerChief Executive Officer and other executive officers will beare based both on Company performance, as measured by achievement of GAAP operating income, and individual performance, as measured by the achievement of personal management objectives. Under the 2010 Plan, cash incentive payments will bewere funded by the Company’s achievement of GAAP operating income, with funding of the plan to be determined as a specified percentage of GAAP operating income (before incentive plan accruals) within specified ranges established by the Compensation Committee. The Compensation Committee will determinedetermined the individual performance of the chief executive officerChief Executive Officer based on the achievement of personal management objectives that will bewere established by the committee during the first fiscal quarter of 2010, and the chief executive officer will determineChief Executive Officer determined the individual performance of the other participants based on the achievement of personal management objectives established by the chiefChief executive officer and reviewed by the committee during the first fiscal quarter of 2010.or there will be nobefore payments are made under the 2010 Plan. Under the 2010 Plan, the aggregate target cash incentive awards for all executive management participants, including the chief executive officer,Chief Executive Officer, other executive officers, and other members of senior management, including vice presidents and director-level employees, total approximately $1.7if any are earned, will bewere paid in February 2011.(16)attorneys’attorneys' fees and expenses. The Company filed a request for re-examination of the patent by the United States Patent and Trademark Office (“PTO”), which was granted by the PTO, and the re-examination is in progress. The litigation has been stayed pending the results of the re-examination. Neither the likelihood nor the amount of any potential exposure to the Company can be estimated at this time.“Contingencies”“Contingencies" (“ASC 450”). Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise estimates. Presently, no accrual has been estimated under ASC 450 for potential losses that may or may not arise from the current lawsuits in which we are involved.(17) Year Ended January 2,
2010 January 3,
2009 December 29,
2007 Total % Total % Total % $ 28,296 15 $ 37,817 17 $ 42,681 19 83,813 43 62,110 28 51,765 23 33,389 17 46,411 21 46,254 20 19,460 10 30,624 14 30,723 13 6,313 3 20,453 9 25,945 11 17,476 9 16,422 7 23,258 10 5,673 3 8,425 4 8,083 4 166,124 85 184,445 83 186,028 81 $ 194,420 100 $ 222,262 100 $ 228,709 100 Year Ended January 1,
2011 January 2,
2010 January 3,
2009 Total % Total % Total % United States $ 36,211 12 $ 28,296 15 $ 37,817 17 Export revenue: China 124,910 42 83,813 43 62,110 28 Europe 54,332 18 33,389 17 46,411 21 Japan 38,992 13 19,460 10 30,624 14 Taiwan 8,839 3 6,313 3 20,453 9 Other Asia 27,853 10 17,476 9 16,422 7 Other Americas 6,631 2 5,673 3 8,425 4 Total export revenue 261,557 88 166,124 85 184,445 83 Total revenue $ 297,768 100 $ 194,420 100 $ 222,262 100 Four of our9%18%, 11%12% and 13%14% of revenue in fiscal 2010, 2009 2008 and 2007,2008, respectively, andrevenue attributable to resales of products by Avnet, Inc. accounted for approximately 13%17%, 14%13% and 15%14% of revenue in fiscal 2010, 2009 and 2008, respectively, and revenue attributable to resales of products by the Weikeng Group (Weikeng Industrial Co. Ltd. (Taiwan) and Weikeng International Co. Ltd. (Hong Kong)) which accounted for approximately 14%, 9% and 0% of revenue in fiscal 2010, 2009 2008 and 2007,2008, respectively. Sales of products to Promaster Technology Corporation accounted for approximately 1%0%, 10%1% and 10% of revenue in fiscal 2010, 2009 2008 and 2007,2008, respectively. Sales of products to ASTI Holdings Ltd. accounted for approximately 16%0%, 7%,16% and 9%7% of revenue in fiscal 2010, 2009 2008 and 2007,2008, respectively. No other individual customer accounted for more than 10% of total revenue in any of the fiscal years 2010, 2009 and 2008 or 2007..we expect the majority of our revenue in fiscal 2010 was related to be resale of our products by sell-through distributors. In connection with this program, Lattice terminated our distribution agreement between Lattice and Promaster Technology Corporation on July 2, 2009, between Lattice and Dragon Technology Distribution and FE Global Electronics effective for various territories on February 1 and February 6, 2010, respectively, and between Lattice and other distributors effective on various dates. Dragon Technology Distribution and FE Global Electronics are wholly-owned subsidiaries of ASTI Holdings Ltd.(18)Company’sCompany's consolidated quarterly results of operations is as follows (in thousands, except per share data): 2009 2008 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 $ 55,087 $ 49,097 $ 46,900 $ 43,336 $ 49,969 $ 57,610 $ 58,079 �� $ 56,604 $ 30,460 $ 26,619 $ 24,586 $ 22,678 $ 24,342 $ 31,117 $ 32,528 $ 31,444 $ 1,185 $ 2,544 $ (15 ) $ (25 ) $ 259 $ 3,882 $ 858 $ 1,790 $ 5,626 $ (4,114 ) $ (2,719 ) $ (5,750 ) $ (14,403 ) $ (6,978 ) $ (13,571 ) $ (3,254 ) $ 0.05 $ (0.04 ) $ (0.02 ) $ (0.05 ) $ (0.12 ) $ (0.06 ) $ (0.12 ) $ (0.03 ) $ 0.05 $ (0.04 ) $ (0.02 ) $ (0.05 ) $ (0.12 ) $ (0.06 ) $ (0.12 ) $ (0.03 ) 2010 2009 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenue $ 73,080 $ 77,137 $ 77,119 $ 70,432 $ 55,087 $ 49,097 $ 46,900 $ 43,336 Gross margin $ 45,841 $ 45,586 $ 47,230 $ 41,168 $ 30,460 $ 26,619 $ 24,586 $ 22,678 Restructuring charges (adjustment) $ (30 ) $ 79 $ (120 ) $ 82 $ 1,185 $ 2,544 $ (15 ) $ (25 ) Net income (loss) $ 13,879 $ 15,368 $ 16,736 $ 11,089 $ 5,626 $ (4,114 ) $ (2,719 ) $ (5,750 ) Basic net income (loss) per share $ 0.12 $ 0.13 $ 0.14 $ 0.10 $ 0.05 $ (0.04 ) $ (0.02 ) $ (0.05 ) Diluted net income (loss) per share $ 0.11 $ 0.13 $ 0.14 $ 0.10 $ 0.05 $ (0.04 ) $ (0.02 ) $ (0.05 ) and January 3, 2009, and the related consolidated statements of operations, changes in stockholders’stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended January 2, 2010.1, 2011. In connection with our audits of the consolidated financial statements, we also have audited the consolidated financial statement schedule as listed in the accompanying index under Item 8. These consolidated financial statements and consolidated financial statement schedule are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedule based on our audits. and January 3, 2009,, and the results of their operations and their cash flows for each of the years in the three-year period ended January 2, 2010,1, 2011, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.Corporation’sCorporation's internal control over financial reporting as of January 2, 2010,1, 2011, based on criteria established inInternal Control—Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 201011, 2011 expressed an unqualified opinion on the effectiveness of the Company’sCompany's internal control over financial reporting.As discussed in Note 10 to the consolidated financial statements, the Company changed their method of accounting for uncertain tax positions effective December 31, 2006.10, 2010Corporation’sCorporation's internal control over financial reporting as of January 2, 2010,1, 2011, based on criteria established in Internal Control—Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Lattice Semiconductor Corporation’sCorporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’sManagement's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’sCompany's internal control over financial reporting based on our audit.company’scompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’scompany's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’scompany's assets that could have a material effect on the financial statements.2, 2010,1, 2011, based on criteria established inInternal Control—Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Commission.2, 20101, 2011 and January 3, 2009,2, 2010, and the related consolidated statements of operations, changes in stockholders’stockholders' equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended January 2, 2010,1, 2011, and our report dated March 10, 201011, 2011 expressed an unqualified opinion on those consolidated financial statements.10, 201011, 2011Management’scompanyCompany is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934. The company’sCompany's internal control over financial reporting is a process designed to provide reasonable assurance regarding reliability of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance with generally accepted accounting principles.company’scompany's internal control over financial reporting as of January 2, 2010.1, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control—Integrated Framework. Based on this assessment, management concluded that, as of January 2, 2010,1, 2011, the Company’sCompany's internal control over financial reporting was effective.Company’sCompany's financial statements in this report on Form 10-K and issued its report on the effectiveness of the Company’sCompany's internal control over financial reporting as of January 2, 2010.There has been no changeinternal controlgeneral ledger, accounts payable and elements of our cost accounting systems. During the period, legacy operating and financial information was migrated to the new ERP system, which resulted in the modification of certain controls, procedures and processes. We follow a system implementation life cycle process that requires significant pre-implementation planning, design and testing. We plan to continue to replace our legacy systems with the new ERP system functionality over financial reporting that occurred in our fiscal quarter or fiscal year ended January 2, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.the next several years.None.20102011 Annual Meeting of Stockholders, pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, which we will file not later than 120 days after the end of the fiscal year covered by this report. With the exception of the information expressly incorporated by reference from the Proxy Statement, the Proxy Statement is not to be deemed filed as a part of this report.captioncaptions “Proposal 1: Election of Directors” and “Board“Corporate Governance and Other Matters--Board Meetings and Committees” in the Proxy Statement. Information regarding our executive officers that is required by this item is set forth in Part I of this report under the caption “Executive Officers of the Registrant.”Company’sCompany's website at www.latticesemi.com and is available in print to any shareholder upon request.3, 2009.2, 2010. The procedures by which security holders may recommend nominees to our Board of Directors were described in detail in the information concerning our Nominating and Governance Committee under the caption “Board Meetings and Committees” in our Proxy Statement filed March 26, 2009.“Board“Corporate Governance and Other Matters--Board Meetings and Committees” in the Proxy Statement.“Compensation Discussion and Analysis,“Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” in the Proxy Statement is incorporated herein by reference.Equity Compensation Plan InformationThe following table summarizes information, as of January 2, 2010, with respect to shares of our common stock that may be issued under our existing equity compensation plans. The table does not include information with respect to shares subject to outstanding options assumed by us in connection with mergers and acquisitions. Footnote (5) to the table sets forth the total number of shares of our common stock issuable upon the exercise of those assumed options as of January 2, 2010, and the weighted average exercise price of those options. No additional options may be granted under those assumed plans. (A) (B) (C) Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights Weighted
average
exercise
price of
outstanding
options and
warrants Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities reflected
in column (A)) (in thousands except per share amounts) 12,392 $ 2.86 12,839 (2) — (3) — — (4) 12,392 $ 2.86 12,839 (1)Includes shares of our common stock issuable upon exercise of options from the 1996 Stock Incentive Plan, the 2001 Stock Plan, the 2001 Outside Directors’ Stock Option Plan and Inducement Options.(2)Includes approximately 675,000 shares reserved for issuance under our Employee Stock Purchase Plan.(3)All warrants have expired unexercised.(4)All common stock held for the benefit of certain executives by our executive deferred compensation plan was distributed in early 2009.(5)The table does not include information for the stock options assumed by us in connection with mergers and acquisitions. At January 2, 2010, a total of 45,000 shares of our common stock were issuable upon exercise of those assumed options. The weighted-average exercise price of those assumed options is $8.17 per share.“Director“Corporate Governance and Other Matters--Director Independence” in the Proxy Statement is incorporated herein by reference.Consolidated Financial Statements: Consolidated Balance Sheets, at January 2, 20101, 2011 and January 3, 20092, 2010 38Consolidated Statements of Operations, for the Years ended January 1, 2011, January 2, 2010 and January 3, 2009 and December 29, 2007 39Consolidated Statements of Changes in Stockholders’Stockholders' Equity and Comprehensive Income (Loss), for the Years ended January 1, 2011, January 2, 2010 and January 3, 2009 and December 29, 2007 40Consolidated Statements of Cash Flows, for the Years ended January 1, 2011, January 2, 2010 and January 3, 2009 and December 29, 2007 41Notes to Consolidated Financial Statements 42(2) Financial Statement Schedules. (2) Financial Statement Schedules. Schedule II-ValuationII—Valuation and Qualifying Accounts ExhibitNumber Description 3.1 The Company’sCompany's Restated Certificate of Incorporation filed February 24, 2004 (Incorporated by reference to Exhibit 3.1 filed with the Company’sCompany's Annual Report on Form 10-K for the year ended January 3, 2004).3.2 The Company’sCompany's Bylaws, as amended and restated as of January 31, 2006 (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed February 3, 2006).4.4 Indenture, dated as of June 20, 2003, between the Company and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 filed with the Company’sCompany's Registration Statement on Form S-3 on August 13, 2003).4.5 Form of Note for the Company’sCompany's Zero Coupon Convertible Subordinated Notes (Incorporated by reference to Exhibit 4.2 filed with the Company’sCompany's Registration Statement on Form S-3 on August 13, 2003).10.23 Advance Production Payment Agreement dated March 17, 1997 among Lattice Semiconductor Corporation and Seiko Epson Corporation and S MOS Systems, Inc. (Incorporated by reference to Exhibit 10.23 filed with the Company’sCompany's Annual Report on Form 10-K for the fiscal year ended January 1, 2005)(1).10.24* Lattice Semiconductor Corporation 1996 Stock Incentive Plan, as amended, and Related Form of Option Agreement (Incorporated by reference to Exhibits (d)(1) and (d)(2) to the Company’sCompany's Schedule TO filed on February 13, 2003).10.33* 2001 Outside Directors’Directors' Stock Option Plan, as amended and restated effective May 1, 2007 (Incorporated by reference to the Appendix A filed with the Company’sCompany's 2007 Definitive Proxy Statement on Schedule 14A filed on April 5, 2007).
Number 10.34* 2001 Stock Plan, as amended, and related Form of Option Agreement (Incorporated by reference to Exhibits (d)(3) and (d)(4) to the Company’sCompany's Schedule TO filed on February 13, 2003).10.35 Intellectual Property Agreement by and between Agere Systems Inc. and Agere Systems Guardian Corporation and Lattice Semiconductor Corporation as Buyer, dated January 18, 2002 (Incorporated by reference to Exhibit 10.35 filed with the Company’sCompany's Annual Report on Form 10-K for the year ended December 29, 2001).10.37* Lattice Semiconductor Corporation Executive Deferred Compensation Plan, as amended and restated effective as of August 11, 1997 (Incorporated by reference to Exhibit 99.3 filed with the Company’sCompany's Registration Statement on Form S-3, as amended, dated October 17, 2002).10.38* Amendment No. 1, to the Lattice Semiconductor Corporation Executive Deferred Compensation Plan, as amended, dated November 19, 1999 (Incorporated by reference to Exhibit 99.4 filed with the Company’sCompany's Registration Statement on Form S-3, as amended, dated October 17, 2002).10.39 Registration Rights Agreement, dated as of June 20, 2003, between the Company and the initial purchaser named therein (Incorporated by reference to Exhibit 4.3 filed with the Company’sCompany's Registration Statement on Form S-3 on August 13, 2003).10.41* Form of Indemnification Agreement executed by each director and executive officer of the Company and certain other officers and employees of the Company and its subsidiaries (Incorporated by reference to Exhibit 10.41 filed with the Company’sCompany's Annual Report on Form 10-K for the year ended January 3, 2004).10.42 Amendment dated March 25, 2004 to Advance Production Payment Agreement dated March 17, 1997, as amended, among Lattice Semiconductor Corporation and Seiko Epson Corporation and S MOS Systems, Inc. (Incorporated by reference to Exhibit 10.42 filed with the Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended April 3, 2004)(1).10.43 Advance Payment and Purchase Agreement dated September 10, 2004 between Lattice Semiconductor Corporation and Fujitsu Limited (Incorporated by reference to Exhibit 10.1 filed with the Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended October 2, 2004)(1).10.44* Employment Agreement between Lattice Semiconductor Corporation and Stephen A. Skaggs dated August 9, 2005 (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed on August 12, 2005).10.45* Compensation Arrangement between Lattice Semiconductor Corporation and Patrick S. Jones, Chairman of the Board of Directors (Incorporated by reference to Exhibit 99.2 filed with the Company’sCompany's Current Report on Form 8-K filed on August 12, 2005).10.46* Employment Agreement between Lattice Semiconductor Corporation and Jan Johannessen dated November 1, 2005 (Incorporated by reference to Exhibit 10.1 filed with the Company’sCompany's Quarterly Report on Form 10-Q filed on November 4, 2005).10.47* Employment Agreement between Lattice Semiconductor Corporation and Martin R. Baker dated November 1, 2005 (Incorporated by reference to Exhibit 10.2 filed with the Company’sCompany's Quarterly Report on Form 10-Q filed on November 4, 2005).10.48* Employment Agreement between Lattice Semiconductor Corporation and Stephen M. Donovan dated November 1, 2005 (Incorporated by reference to Exhibit 10.3 filed with the Company’sCompany's Quarterly Report on Form 10-Q filed on November 4, 2005).10.50* Compensation Arrangement between Lattice Semiconductor Corporation and Chairpersons for Committees of the Board of Directors (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed on December 12, 2005).ExhibitNumber Description10.51* Form of Amendment to Stock Option Agreements for 1996 Stock Incentive Plan, as amended, and 2001 Stock Plan, as amended (Incorporated by reference to Exhibit 99.3 filed with the Company’sCompany's Current Report on Form 8-K filed on December 12, 2005).10.52* 2006 Executive Bonus Plan (Incorporated by reference to Exhibit 99.4 filed with the Company’sCompany's Current Report on Form 8-K filed on December 12, 2005).10.53 Addendum dated March 22, 2006 to the Advance Payment and Purchase Agreement dated September 10, 2004 between Lattice Semiconductor Corporation and Fujitsu Limited (Incorporated by reference to Exhibit 10.53 filed with the Company’sCompany's Quarterly Report on Form 10-Q filed on November 7, 2006).Exhibit Number Description 10.54 Addendum No. 2 dated effective October 1, 2006 to the Advance Payment and Purchase Agreement dated September 10, 2004 between Lattice Semiconductor Corporation and Fujitsu Limited (Incorporated by reference to Exhibit 10.54 filed with the Company’sCompany's Quarterly Report on Form 10-Q filed on November 7, 2006)(1).10.55* 2007 Executive Variable Compensation Plan, as amended (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed on December 7, 2006, as amended as described in the Company’sCompany's Current Report on Form 8-K filed on February 8, 2007).10.56* Form of Notice of Grant of Restricted Stock Units to Executive Officer (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed on February 8, 2007).10.57* 2008 Executive Variable Compensation Plan, as amended (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed on December 7, 2007).10.58* Letter Agreement between Lattice Semiconductor Corporation and Stephen A. Skaggs dated January 31, 2008 (Incorporated by reference to Exhibit 10.58 filed with the Company’sCompany's Annual Report on Form 10-K filed on March 13, 2008).10.59* Employment Agreement between Lattice Semiconductor Corporation and Bruno Guilmart dated May 14, 2008 (Incorporated by reference to Exhibit 99.1 filed with the Company’sCompany's Current Report on Form 8-K filed on June 16, 2008).10.60* Employment Agreement between Lattice Semiconductor Corporation and Byron Milstead dated May 14, 2008 (Incorporated by reference to Exhibit 10.60 filed with the Company’sCompany's Current Report on Form 10-Q filed on August 8, 2008).10.61* Form of Inducement Stock Option Agreement (Incorporated by reference to Exhibit 10.61 filed with the Company’sCompany's Current Report on Form 10-Q filed on November 5, 2008).10.62* Employment Agreement between Lattice Semiconductor Corporation and Michael G. Potter dated February 4, 2009 (Incorporated by reference to Exhibit 99.2 filed with the Company’sCompany's Current Report on Form 8-K filed on February 4, 2009).10.63* 2009 Bonus Plan of Lattice Semiconductor Corporation (Incorporated by reference to Exhibit 10.63 filed with the Company’sCompany's Annual Report on Form 10-K filed on March 13, 2009).10.64 Addendum #4 dated effective December 18, 2009 to the Advanced Payment and Purchase Agreement dated September 10, 2004 between Lattice Semiconductor Corporation and Fujitsu Limited (Incorporated by reference to Exhibit 10.64 filed with the Company’sCompany's Annual Report on Form 10-K filed on March 13, 2009).10.65 Letter Agreement effective December 18, 2008 re Repayment of Advance Payment between Lattice Semiconductor Corporation and Fujitsu Microelectronics Limited and Fujitsu Microelectronics America, IncInc. (Incorporated by reference to Exhibit 10.65 filed with the Company’sCompany's Annual Report on Form 10-K filed on March 13, 2009).10.66* Employment Agreement between Lattice Semiconductor Corporation and Byron Milstead effective as of December 30, 20082008. (Incorporated by reference to Exhibit 10.66 filed with the Company’sCompany's Annual Report on Form 10-K filed on March 13, 2009).ExhibitNumber Description10.67* Employment Agreement between Lattice Semiconductor Corporation and Sean Riley dated September 22, 2008 (Incorporated by reference to Exhibit 10.67 filed with the Company’sCompany's Current Report on Form 10-Q filed on April 4, 2009).10.68* Employment Agreement between Lattice Semiconductor Corporation and Christopher M. Fanning amended and restated as of December 15, 2008 (Incorporated by reference to Exhibit 10.68 filed with the Company’sCompany's Current Report on Form 10-Q filed on April 4, 2009).10.69* Lattice Semiconductor Corporation 2010 Cash Incentive Compensation Plan.Plan (Incorporated by reference to Exhibit 10.69 filed with the Company's Annual Report on Form 10-K filed on March 10, 2010).10.70* Employment Agreement between Lattice Semiconductor Corporation and Darin G. Billerbeck dated as of November 8, 2010 (Incorporated by reference to Exhibit 10.70 filed with the Company's Current Report on Form 10-Q filed on November 5, 2010). Description 14.1 Standards of Ethics and Conduct (Incorporated by reference to Exhibit 14.1 filed with the Company’sCompany's Annual Report on Form 10-K for the year ended January 3, 2004).21.1 Subsidiaries of the Registrant. 23.1 Consent of Independent Registered Public Accounting Firm. 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ________________ (1) Pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, confidential treatment has been granted to portions of this exhibit, which portions have been deleted and filed separately with the Securities and Exchange Commission. * Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report on Form 10-K pursuant to Item 15(b) thereof. (b) See (a)(3) above. (c) See (a)(1) and (2) above. (b) See (a)(3) above.(c) See (a)(1) and (2) above.LATTICE SEMICONDUCTOR CORPORATION (Registrant)By: By: 10, 2010Bruno GuilmartDarin G. Billerbeck and Michael G. Potter, or either of them, his or her attorneys-in-fact, each with the power of substitution, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Date DateRUNO GUILMARTBruno Guilmart President, Chief Executive Officer and Director (Principal Executive Officer) March 10, 201011, 2011Darin G. Billerbeck Michael G. Potter Corporate Vice President and Chief
Financial Officer (Principal Financial and
Accounting Officer)March 10, 201011, 2011Michael G. Potter David E. Coreson Director March 10, 201011, 2011David E. Coreson Patrick S. Jones Director March 10, 201011, 2011Patrick S. Jones Balaji Krishnamurthy Director March 10, 201011, 2011Balaji Krishnamurthy W. Richard Marz Director March 10, 201011, 2011W. Richard Marz Gerhard H. Parker Director March 10, 201011, 2011Gerhard H. Parker Hans Schwarz Director March 11, 2011 Hans Schwarz March 10, 2010 Column B Column C Column D Column E Column F Balance at
beginning of
period Charged to
costs and
expenses Charged to
other
accounts Write-offs
net of
recoveries Balance at
end of period $ 292,752 $ — $ 25 $ (94 ) $ 292,683 1,173 62 — (272 ) 963 625 56 — (528 ) 153 $ 294,550 $ 118 $ 25 $ (894 ) $ 293,799 $ 279,687 $ 13,132 $ (67 ) $ — $ 292,752 872 303 — (2 ) 1,173 683 765 — (823 ) 625 $ 281,242 $ 14,200 $ (67 ) $ (825 ) $ 294,550 $ 191,871 $ 90,030 $ (2,214 )(1) $ — $ 279,687 877 — — (5 ) 872 612 232 — (161 ) 683 $ 193,360 $ 90,262 $ (2,214 ) $ (166 ) $ 281,242 (1)Primarily related to a Retained earnings accumulated (deficit) adjustment for the impact of the adoption of ASC 740, “Income Taxes.”Column A Column B Column C Column D Column E Column F Classification Balance at
beginning of
period Charged to
costs and
expenses Charged to
other accounts Write-offs
net of
recoveries Balance at end
of periodFiscal year ended January 1, 2011: Allowance for deferred taxes $ 292,683 $ — $ (476 ) $ (20,999 ) $ 271,208 Allowance for doubtful accounts 963 — — (97 ) 866 Allowance for warranty expense 153 — — (54 ) 99 $ 293,799 $ — $ (476 ) $ (21,150 ) $ 272,173 Fiscal year ended January 2, 2010: Allowance for deferred taxes $ 292,752 $ — $ 25 $ (94 ) $ 292,683 Allowance for doubtful accounts 1,173 62 — (272 ) 963 Allowance for warranty expense 625 56 — (528 ) 153 $ 294,550 $ 118 $ 25 $ (894 ) $ 293,799 Fiscal year ended January 3, 2009: Allowance for deferred taxes $ 279,687 $ 13,132 $ (67 ) $ — $ 292,752 Allowance for doubtful accounts 872 303 — (2 ) 1,173 Allowance for warranty expense 683 765 — (823 ) 625 $ 281,242 $ 14,200 $ (67 ) $ (825 ) $ 294,550