Altera Announces Second Quarter Results; Raises Dividend

SAN JOSE, Calif., July 24, 2014 /PRNewswire/ -- Altera Corporation (NASDAQ: ALTR) today announced second quarter sales of $491.5 million, up 7 percent from the first quarter of 2014 and up 17 percent from the second quarter of 2013. Second quarter net income was $127.0 million, $0.41 per diluted share, compared with net income of $116.5 million, $0.37 per diluted share, in the first quarter of 2014 and $101.5 million, $0.31 per diluted share, in the second quarter of 2013.

Year-to-date cash flow from operating activities was $301.4 million. Altera repurchased approximately 6.0 million shares during the quarter at a cost of approximately $197.0 million.

Altera's board of directors has declared a quarterly cash dividend of $0.18 per share, to be paid on September 2, 2014 to shareholders of record on August 11, 2014. The company's previous quarterly cash dividend had been $0.15 per share.

"Revenue growth was stronger than expected with new products up double digits sequentially. New product growth reflects very good 28 nm FPGA performance as well as continued solid growth from our 40 nm products," said John Daane, president, chief executive officer, and chairman of the board. "With new capabilities and vastly improved performance compared with our prior-generation midrange offerings, our 20 nm Arria 10 FPGAs and SoCs are displaying solid competitive potential as we are seeing a record level of identified customer opportunities. Further, at the high end, with continuing development of our Intel-sourced 14 nm FinFET-based Stratix 10 FPGAs, it remains clear that this new technology coupled with our HyperFlex architecture will deliver industry-leading density and performance as well as lower power and cost."

Recent accomplishments mark the company's continuing progress:

  • Early access customers are successfully achieving the anticipated 2X core performance gain in their Stratix® 10 FPGA and SOC designs compared to previous generation high-performance programmable devices. This breakthrough leap in FPGA core performance is a result of Intel's 14 nm Tri-Gate process technology and the groundbreaking Stratix 10 HyperFlex™ architecture. Through the Stratix 10 FPGA early access program, Altera is working with several customers to run their existing designs through performance evaluation tools built for Stratix 10 FPGAs. The customer designs target a wide range of applications and leverage a variety of hardware design approaches, including ASIC replacement designs, traditional high-performance FPGA communication designs and high-throughput data center and computation designs.

 

  • Altera continues to work with several partners and customers on software-defined data centers and server acceleration, including Microsoft Corporation, who is seeking to accelerate portions of Microsoft's Bing web search engine. Based on the results of this collaboration, Bing plans to roll out Altera FPGA-accelerated servers to process customer searches in one of its data centers starting in early 2015. Altera's FPGAs accelerate the processing of large amounts of data on servers, which helps address big data challenges and massive distributed workloads.  Altera's view of the software defined data center is that FPGAs are helping drive the transformation of the modern data center with a virtualized infrastructure delivered as a service using commodity servers. In this environment, FPGAs can deliver performance advantages, in some cases orders of magnitude improvements, with significantly lower power consumption than alternative approaches. A data center with reconfigurable fabric enabled by Altera FPGAs provides greater business agility, and its complexity can be managed as it scales.

 

SELECTED SECOND QUARTER REVENUE AND RELATED RESULTS


($ in thousands)

Key Ratios & Information


June 27, 2014


March 28, 2014

Current Ratio


6:1   


6:1   

Liabilities/Equity


2:3   


2:3   

Quarterly Operating Cash Flows


$

170,958


$

130,430

TTM Return on Equity


13%


13%

Quarterly Depreciation Expense


$

12,222


$

12,996

Quarterly Capital Expenditures


$

9,620


$

7,116

Inventory MSOH (1): Altera


3.2


3.1

Inventory MSOH (1): Distribution


0.6


0.6

Cash Conversion Cycle (Days)


160


157

Turns


42%


48%

Book to Bill


>1.0   


>1.0   






Note (1): MSOH: Months Supply On Hand





  

ALTERA CORPORATION

NET SALES SUMMARY

(Unaudited)



Three Months Ended


Quarterly Growth Rate


June 27, 2014


March 28, 2014


June 28, 2013


Sequential Change


Year-

Over-Year

Change

Geography















Americas

16

%


15

%


17

%


8

%


9

%

Asia Pacific

43

%


43

%


39

%


8

%


28

%

EMEA

27

%


26

%


28

%


9

%


13

%

Japan

14

%


16

%


16

%


(2)

%


3

%

Net Sales

100

%


100

%


100

%


7

%


17

%

Product Category















New

53

%


49

%


41

%


15

%


53

%

Mainstream

21

%


23

%


28

%


2

%


(11)

%

Mature and Other

26

%


28

%


31

%


(4)

%


(5)

%

Net Sales

100

%


100

%


100

%


7

%


17

%

Vertical Market















Telecom & Wireless

46

%


45

%


42

%


9

%


28

%

Industrial Automation, Military & Automotive

21

%


22

%


22

%


3

%


14

%

Networking, Computer & Storage

15

%


15

%


18

%


1

%


(6)

%

Other

18

%


18

%


18

%


10

%


16

%

Net Sales

100

%


100

%


100

%


7

%


17

%

FPGAs and CPLDs















FPGA

84

%


83

%


83

%


8

%


18

%

CPLD

8

%


9

%


9

%


0

%


7

%

Other Products

8

%


8

%


8

%


3

%


12

%

Net Sales

100

%


100

%


100

%


7

%


17

%

Product Category Description

  • New Products include the Arria® 10, Stratix® V, Stratix IV, Arria V, Arria II, Cyclone® V, Cyclone IV, MAX® V, HardCopy® IV devices and Enpirion PowerSoCs.
  • Mainstream Products include the Stratix III, Cyclone III, MAX II and HardCopy III devices.
  • Mature and Other Products include the Stratix II, Stratix, Arria GX, Cyclone II, Cyclone, MAX 3000A, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, HardCopy II, HardCopy, FLEX® series, APEX™ series, Mercury™, Excalibur™ devices, configuration and other devices, intellectual property cores, and software and other tools.

Business Outlook for the Third Quarter 2014


Sales and Income Statement



Sequential Sales Growth

- 2% to + 2%

Gross Margin

67% +/- .5%

Research and Development (1)

$114 - $116 million

SG&A

$78 - $80 million

Other Income/Expense, Net (2)

Net expense of approximately $4 million

Tax Rate

11% - 12%

Diluted Share Count

Less than 314 million

Turns

High 30's

Inventory MSOH

High 3's



Note (1): The business outlook for Research and Development expense includes amortization of acquisition-related intangible assets


Note (2): Other Income/Expense, Net includes Interest income and other and Interest expense in our consolidated statements of comprehensive income.

                                                                               

Vertical Market




Telecom & Wireless

Flat

Industrial Automation, Military & Automotive

Flat

Networking, Computer & Storage

Up

Other

Down

Second Quarter Earnings Conference Call

A conference call will be held today at 1:45 p.m. Pacific time to discuss the quarter's results and management's current business outlook. The web cast and subsequent replay will be available in the Investor Relations section of the company's website at www.altera.com. A telephonic replay of the call may be accessed later in the day by calling (719) 457-0820 and referencing confirmation code 258712. The telephonic replay will be available for two weeks following the live call.

Forward-Looking Statements

Statements in this press release that are not historical are "forward-looking statements" as the term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or preceded by words such as "will," "expects," "anticipates," or other words that imply or predict a future state. Forward-looking statements include, but are not limited to, statements regarding both absolute and relative product performance, product development schedules, customer intention to incorporate our FPGAs into equipment supporting the Bing search engine, and any projection of revenue, gross margin, expense or other financial items discussed in the Business Outlook section or elsewhere in this press release. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainty that can cause actual results to differ materially from those currently anticipated, due to a number of factors, including without limitation, current global economic conditions, customer business environment, customer inventory levels, product availability, vertical market mix, market acceptance of the company's products, the performance of products once introduced, product introduction schedules, the rate of growth of the company's new products including Cyclone® V, Cyclone IV, Arria® V, Arria II, Stratix® V, Stratix IV FPGAs, MAX® V CPLDs, HardCopy®  IV device families and Enpirion PowerSoCs, as well as changes in economic conditions and other risk factors discussed in documents filed by the company with the Securities and Exchange Commission (SEC) from time to time. Copies of Altera's SEC filings are posted on the company's website and are available from the company without charge. Forward-looking statements are made as of the date of this release, and, except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About Altera

Altera® programmable solutions enable designers of electronic systems to rapidly and cost effectively innovate, differentiate and win in their markets. Altera offers FPGAs, SoCs, CPLDs, ASICs and complementary technologies, such as power management, to provide high-value solutions to customers worldwide. Visit www.altera.com.

ALTERA, ARRIA, CYCLONE, ENPIRION, MAX, MEGACORE, NIOS, QUARTUS and STRATIX words and logos are trademarks of Altera Corporation and registered in the U.S. Patent and Trademark Office and in other countries. All other words and logos identified as trademarks or service marks are the property of their respective holders as described at www.altera.com/legal.

INVESTOR CONTACT


MEDIA CONTACT

Scott Wylie - Vice President


Sue Martenson - Senior Manager

Investor Relations


Public Relations

(408) 544-6996


(408) 544-8158

swylie@altera.com


newsroom@altera.com

 

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



















Three Months Ended


Six Months Ended

(In thousands, except per share amounts)


June 27, 2014


March 28, 2014


June 28, 2013


June 27, 2014


June 28, 2013

















Net sales


$

491,517



$

461,092



$

421,759



$

952,609



$

832,260


Cost of sales


162,391



151,868



135,104



314,259



261,187


Gross margin


329,126



309,224



286,655



638,350



571,073


Operating expense
















Research and development expense


101,121



97,657



95,489



198,778



183,206


Selling, general, and administrative expense


78,974



74,507



77,869



153,481



156,469


Amortization of acquisition-related intangible assets


2,464



2,465



915



4,929



1,128


Total operating expense


182,559



174,629



174,273



357,188



340,803


Operating margin (1)


146,567



134,595



112,382



281,162



230,270


Compensation expense /(benefit)— deferred compensation plan


3,126



1,454



(160)



4,580



3,262


(Gain)/loss on deferred compensation plan securities


(3,126)



(1,454)



160



(4,580)



(3,262)


Interest income and other


(7,819)



(5,985)



(2,778)



(13,804)



(4,437)


Gain reclassified from other comprehensive income


(43)



(48)



(42)



(91)



(96)


Interest expense


10,877



10,488



3,389



21,365



5,854


Income before income taxes


143,552



130,140



111,813



273,692



228,949


Income tax expense


16,548



13,626



10,304



30,174



7,251


Net income


127,004



116,514



101,509



243,518



221,698


















Other comprehensive income/(loss):
















Unrealized gain/(loss) on investments:
















Unrealized holding gain/(loss) on investments arising during period, net of tax of $23, $23, ($47),$46 and ($41)


14,471



12,560



(9,031)



27,031



(9,032)


Less: Reclassification adjustments for gain on investments included in net income, net of tax of $6, $4, $5, $10 and $10


(37)



(44)



(37)



(81)



(86)


Other comprehensive income/(loss)


14,434



12,516



(9,068)



26,950



(9,118)


Comprehensive income


$

141,438



$

129,030



$

92,441



$

270,468



$

212,580


















Net income per share:
















Basic


$

0.41



$

0.37



$

0.32



$

0.78



$

0.69


Diluted


$

0.41



$

0.37



$

0.31



$

0.77



$

0.69


















Shares used in computing per share amounts:
















Basic


311,000



316,552



320,472



313,713



320,175


Diluted


313,513



318,901



323,527



316,145



323,279


















Dividends per common share


$

0.15



$

0.15



$

0.10



$

0.30



$

0.20


















Tax rate


11.5

%


10.5

%


9.2

%


11.0

%


3.2

%

% of Net sales:
















Gross margin


67.0

%


67.1

%


68.0

%


67.0

%


68.6

%

Research and development (1)


21.1

%


21.7

%


22.9

%


21.4

%


22.1

%

Selling, general, and administrative


16.1

%


16.2

%


18.5

%


16.1

%


18.8

%

Operating margin(2)


29.8

%


29.2

%


26.6

%


29.5

%


27.7

%

Net income


25.8

%


25.3

%


24.1

%


25.6

%


26.6

%

         


Notes:
































(1) Research and development expense as a percentage of Net sales includes amortization of acquisition-related intangible assets.


(2) We define operating margin as gross margin less research and development expense, selling, general and administrative expense and amortization of acquisition-related intangible assets, as presented above. This presentation differs from income from operations as defined by U.S. Generally Accepted Accounting Principles ("GAAP"), as it excludes the effect of compensation associated with the deferred compensation plan obligations. Since the effect of compensation associated with our deferred compensation plan obligations is offset by losses/(gains) from related securities, we believe this presentation provides a more meaningful representation of our ongoing operating performance. A reconciliation of operating margin to income from operations follows:












Three Months Ended


Six Months Ended

(In thousands, except per share amounts)


June 27, 2014


March 28, 2014


June 28, 2013


June 27, 2014


June 28, 2013

Operating margin (non-GAAP)


$

146,567



$

134,595



$

112,382



$

281,162



$

230,270


Compensation expense/(benefit) — deferred compensation plan


3,126



1,454



(160)



4,580



3,262


Income from operations (GAAP)


$

143,441



$

133,141



$

112,542



$

276,582



$

227,008


    

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except par value amount)


June 27, 2014


December 31, 2013








Assets







Current assets:







Cash and cash equivalents


$

2,688,326



$

2,869,158


Short-term investments


118,239



141,487


Total cash, cash equivalents, and short-term investments


2,806,565



3,010,645


Accounts receivable, net


452,559



483,032


Inventories


176,728



163,880


Deferred income taxes — current


55,599



63,228


Deferred compensation plan — marketable securities


65,852



66,455


Deferred compensation plan — restricted cash equivalents


15,553



16,699


Other current assets


36,852



48,901


Total current assets


3,609,708



3,852,840


Property and equipment, net


195,582



204,142


Long-term investments


1,756,678



1,695,066


Deferred income taxes — non-current


19,755



10,806


Goodwill


74,341



73,968


Acquisition-related intangible assets, net


77,221



82,150


Other assets, net


82,579



76,676


Total assets


$

5,815,864



$

5,995,648









Liabilities and stockholders' equity







Current liabilities:







Accounts payable


$

52,747



$

44,163


Accrued liabilities


26,607



41,218


Accrued compensation and related liabilities


54,345



51,105


Deferred compensation plan obligations


81,405



83,154


Deferred income and allowances on sales to distributors


415,199



487,746


Total current liabilities


630,303



707,386


Income taxes payable — non-current


296,594



276,326


Long-term debt


1,492,113



1,491,466


Other non-current liabilities


7,661



8,403


Total liabilities


2,426,671



2,483,581


Stockholders' equity:







Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 308,955 shares at June 27, 2014 and 317,769 shares at December 31, 2013


309



318


Capital in excess of par value


1,179,335



1,216,826


Retained earnings


2,210,561



2,322,885


Accumulated other comprehensive loss


(1,012)



(27,962)


Total stockholders' equity


3,389,193



3,512,067


Total liabilities and stockholders' equity


$

5,815,864



$

5,995,648









    

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)




Six Months Ended

 (In thousands)


June 27, 2014


June 28, 2013








Cash Flows from Operating Activities:







Net income


$

243,518



$

221,698


Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization


28,731



22,449


Amortization of acquisition-related intangible assets


4,929



1,128


Amortization of debt discount and debt issuance costs


1,558



563


Stock-based compensation


48,068



47,274


Net gain on sale of available-for-sale securities


(91)




Amortization of investment discount/premium


1,300




Deferred income tax expense/(benefit)


12,469



(21,767)


Tax effect of employee stock plans


121



1,280


Excess tax benefit from employee stock plans


(612)



(1,148)


Changes in assets and liabilities, net of effects of acquisitions:







Accounts receivable, net


30,473



(147,407)


Inventories


(12,848)



21,649


Other assets


11,078



28,788


Accounts payable and other liabilities


5,703



(19,585)


Deferred income and allowances on sales to distributors


(72,547)



50,886


Income taxes payable


5,867



14,196


Deferred compensation plan obligations


(6,329)



(5,961)


Net cash provided by operating activities


301,388



214,043


Cash Flows from Investing Activities:







Purchases of property and equipment


(21,614)



(23,337)


Sales of deferred compensation plan securities, net


6,329



5,961


Purchases of available-for-sale securities


(204,810)



(175,642)


Proceeds from sale of available-for-sale securities


58,015



72,126


Proceeds from maturity of available-for-sale securities


134,212



83,855


Acquisitions, net of cash acquired




(145,313)


Holdback payment for prior acquisition


(3,353)




Purchases of intangible assets


(535)




Purchases of other investments


(8,224)



(176)


Net cash used in investing activities


(39,980)



(182,526)


Cash Flows from Financing Activities:







Proceeds from issuance of common stock through stock plans


22,696



27,296


Shares withheld for employee taxes


(11,240)



(6,722)


Payment of dividends to stockholders


(94,179)



(64,048)


Payment of debt assumed in acquisitions




(22,000)


Long-term debt and credit facility issuance costs


(1,321)




Repurchases of common stock


(358,808)



(54,974)


Excess tax benefit from employee stock plans


612



1,148


Net cash used in financing activities


(442,240)



(119,300)


Net decrease in cash and cash equivalents


(180,832)



(87,783)


Cash and cash equivalents at beginning of period


2,869,158



2,876,627


Cash and cash equivalents at end of period


$

2,688,326



$

2,788,844


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SOURCE Altera Corporation



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