Altera Announces Second Quarter Results; Raises Dividend

Jul 24, 2014, 16:15 ET from Altera Corporation

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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