Altera Announces Third Quarter Results

Oct 23, 2014, 16:15 ET from Altera Corporation

SAN JOSE, Calif., Oct. 23, 2014 /PRNewswire/ -- Altera Corporation (NASDAQ: ALTR) today announced third quarter sales of $499.6 million, up 2 percent from the second quarter of 2014 and up 12 percent from the third quarter of 2013. Third quarter net income was $118.0 million, $0.38 per diluted share, compared with net income of $127.0 million, $0.41 per diluted share, in the second quarter of 2014 and $119.4 million, $0.37 per diluted share, in the third quarter of 2013.

Year-to-date cash flow from operating activities was $515.4 million. Altera repurchased approximately 4.2 million shares during the quarter at a cost of approximately $144.2 million.

Altera's board of directors has declared a quarterly cash dividend of $0.18 per share, to be paid on December 1, 2014 to shareholders of record on November 10, 2014.

"Sales were at the high end of expectations, on the back of solid new product growth, led by strong 28 nm gains," said John Daane, president, chief executive officer, and chairman of the board. "We continue to be encouraged by the positive feedback from early access customers of our first-ever FinFET-based FPGAs, the high-end Stratix 10 family.  Utilizing a new proprietary HyperFlex architecture and manufactured with 14 nm Intel TriGate process technology, Stratix 10 devices will offer dramatic improvements in logic density, performance, and power consumption, significantly expanding the reach of Altera FPGA solutions."

Several recent accomplishments mark the company's continuing progress:

  • Altera has released early access design software for Stratix® 10 FPGAs and SoCs, the industry's first design software targeting 14 nm FPGAs. Customers today can start their Stratix 10 designs and experience firsthand the doubling, on average, in core performance they can achieve as a result of the Stratix 10 HyperFlex™ architecture and the 14 nm Intel Tri-Gate FinFET process. Stratix 10 FPGAs and SoCs are designed to enable the most advanced, highest performance applications in the communications, military, broadcast and computer and storage markets. For high-performance systems that have strict power budgets, Stratix 10 devices will allow customers to achieve up to a 70 percent reduction in power consumption compared with Stratix V FPGAs. Stratix 10 FPGAs and SoCs will also provide the industry's highest levels of system integration, including:
    • The highest density monolithic device with greater than four million logic elements.
    • A high-performance, quad-core 64-bit ARM® Cortex-A53 processor system.
    • Multi-die solutions capable of integrating DRAM, SRAM, ASIC, processors and analog components in a single package.
    • Over 10 TeraFLOPs of single-precision, hardened floating point DSP performance.
    • More than 4X serial transceiver bandwidth compared to previous generation FPGAs,   including 28-Gbps backplane-capable transceivers and a path to 56-Gbps transceivers.                
  • Altera and Baidu, China's largest online search engine, are collaborating on the use of FPGAs and convolutional neural network (CNN) algorithms for deep learning applications. These applications are set to play a critical role in the development of more accurate and faster online search. Altera demonstrated its work with Baidu at the recent High Performance Computing for Wall Street conference. In key search functions, such as image classification and recognition tasks, CNNs are considered to be state-of-the-art and provide record-setting accuracy. To dramatically simplify the implementation of parallel processing applications, Baidu is leveraging Altera's Stratix V FPGAs and the Altera SDK for OpenCL™, which achieved Khronos OpenCL conformance testing certification in May 2013. Altera remains the only FPGA supplier with such certification.
  • Altera has signed a three-year strategic agreement with China Mobile Research Institute (CMRI) to research and prototype next-generation green wireless network infrastructure solutions based on the Centralized Radio Access Network (C-RAN) architecture that leverages network function virtualization (NFV).  Cooperation between Altera and CMRI will center on joint research and development for centralized baseband processing of wireless base stations, with a goal of delivering lower power consumption, lower total operating costs and higher scalability than conventional infrastructure. The new, jointly developed C-RAN architecture will enable operators to increase the spectrum efficiency and to add or upgrade processing capabilities with ease via NFV of the baseband processing resources. This will allow operators to reduce their operating expense and create new business models while leveraging existing investments. FPGAs serve key roles in data processing acceleration, component connectivity and front-haul data transportation.
  • Altera has announced the availability of non-volatile MAX® 10 FPGAs, Altera's latest addition to its Generation 10 portfolio. Using TSMC's 55 nm embedded flash process technology, MAX 10 FPGAs revolutionize non-volatile FPGAs by delivering dual-configuration flash, analog and embedded processing capabilities in a small-form-factor, low-cost, instant-on programmable logic device.  The highly integrated FPGAs provide up to 50 percent board area savings compared to other low-cost FPGAs and provide several important system functions, such as an instant-on configuration, fail-safe upgrades, and system monitoring and control.  MAX 10 FPGAs are shipping today and are supported by Quartus® II software, evaluation kits, design services through the Altera Design Services Network (DSN), documentation and training to accelerate system development.

 

SELECTED THIRD QUARTER REVENUE AND RELATED RESULTS







($ in thousands)

Key Ratios & Information


 

September 26, 2014


June 27, 2014

Current Ratio



6:1



6:1

Liabilities/Equity



3:4



2:3

Quarterly Operating Cash Flows


$

214,049


$

170,958

TTM Return on Equity


13%


13%

Quarterly Depreciation Expense


$

11,874


$

12,222

Quarterly Capital Expenditures


$

13,691


$

9,620

Inventory MSOH (1): Altera



3.4



3.2

Inventory MSOH (1): Distribution



0.6



0.6

Cash Conversion Cycle (Days)


154


160

Turns


37%


42%

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


September 26,
 2014


June 27,
 2014


September 27,
 2013


Sequential Change


Year-

Over-Year

Change

Geography















Americas

16

%


16

%


18

%


7

%


1

%

Asia Pacific

42

%


43

%


39

%


0

%


20

%

EMEA

29

%


27

%


28

%


6

%


15

%

Japan

13

%


14

%


15

%


(7)

%


(1)

%

Net Sales

100

%


100

%


100

%


2

%


12

%
















Product Category















New

56

%


53

%


44

%


9

%


45

%

Mainstream

21

%


21

%


26

%


(3)

%


(13)

%

Mature and Other

23

%


26

%


30

%


(10)

%


(14)

%

Net Sales

100

%


100

%


100

%


2

%


12

%
















Vertical Market















Telecom & Wireless

45

%


46

%


41

%


(1)

%


23

%

Industrial Automation, Military & Automotive

21

%


21

%


23

%


%


3

%

Networking, Computer & Storage

16

%


15

%


19

%


14

%


(5)

%

Other

18

%


18

%


17

%


1

%


18

%

Net Sales

100

%


100

%


100

%


2

%


12

%
















FPGAs and CPLDs















FPGA

85

%


84

%


82

%


3

%


17

%

CPLD

8

%


8

%


9

%


(6)

%


(10)

%

Other Products

7

%


8

%


9

%


(6)

%


(7)

%

Net Sales

100

%


100

%


100

%


2

%


12

%

 

Product Category Description

  • New Products include the Arria® 10, Stratix® V, Stratix IV, Arria V, Arria II, Cyclone® V, Cyclone IV, MAX® 10, 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 Fourth Quarter 2014


Sales and Income Statement



Sequential Sales

-2% to -6%

Gross Margin

66.5% +/- 0.5%

Research and Development (1)

$111 - $113 million

SG&A

$78 - $80 million

Other Income/Expense, Net (2)

Net expense of approximately $4 - $5 million

Tax Rate

12% - 13%

Diluted Share Count

Less than 310 million

Turns

Low 40's

Inventory MSOH

Mid 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

Down

Industrial Automation, Military & Automotive

Flat

Networking, Computer & Storage

Down

Other

Down

 

Third 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 and features, product development schedules, potential FPGA market expansion, 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® 10, Arria V, Arria II, Stratix® V, Stratix IV, MAX® 10 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


Nine Months Ended

(In thousands, except per share amounts)


September 26,
 2014


June 27,
 2014


September 27,
 2013


September 26,
 2014


September 27,
 2013

















Net sales


$

499,606



$

491,517



$

445,945



$

1,452,216



$

1,278,205


Cost of sales


166,019



162,391



141,525



480,279



402,712


Gross margin


333,587



329,126



304,420



971,937



875,493


Operating expense
















Research and development expense


112,078



101,121



95,336



310,856



278,542


Selling, general, and administrative expense


77,724



78,974



78,907



231,205



235,376


Amortization of acquisition-related intangible assets


2,465



2,464



1,846



7,394



2,974


Total operating expense


192,267



182,559



176,089



549,455



516,892


Operating margin (1)


141,320



146,567



128,331



422,482



358,601


Compensation (benefit)/expense — deferred compensation plan


(487)



3,126



3,462



4,093



6,724


Loss/(gain) on deferred compensation plan securities


487



(3,126)



(3,462)



(4,093)



(6,724)


Interest income and other


(4,558)



(7,819)



(2,214)



(18,362)



(6,651)


Gain reclassified from other comprehensive (loss)/income


(59)



(43)



(33)



(150)



(129)


Interest expense


10,774



10,877



2,511



32,139



8,365


Income before income taxes


135,163



143,552



128,067



408,855



357,016


Income tax expense


17,154



16,548



8,635



47,328



15,885


Net income


118,009



127,004



119,432



361,527



341,131


















Other comprehensive (loss)/income:
















Unrealized (loss)/gain on investments:
















Unrealized holding (loss)/gain on investments arising during period, net of tax of ($6), $23, $30, $41 and ($12)


(4,929)



14,471



2,419



22,102



(6,613)


Less: Reclassification adjustments for gain on investments included in net income, net of tax of $11, $6, $11, $21 and $21


(48)



(37)



(22)



(129)



(108)


Other comprehensive (loss)/income


(4,977)



14,434



2,397



21,973



(6,721)


Comprehensive income


$

113,032



$

141,438



$

121,829



$

383,500



$

334,410


















Net income per share:
















Basic


$

0.38



$

0.41



$

0.37



$

1.16



$

1.07


Diluted


$

0.38



$

0.41



$

0.37



$

1.15



$

1.05


















Shares used in computing per share amounts:
















Basic


308,215



311,000



320,445



311,853



320,266


Diluted


310,184



313,513



323,505



314,130



323,355


















Dividends per common share


$

0.18



$

0.15



$

0.15



$

0.48



$

0.35


















Tax rate


12.7

%


11.5

%


6.7

%


11.6

%


4.4

%

% of Net sales:
















Gross margin


66.8

%


67.0

%


68.3

%


66.9

%


68.5

%

Research and development (1)


22.9

%


21.1

%


21.8

%


21.9

%


22.0

%

Selling, general, and administrative


15.6

%


16.1

%


17.7

%


15.9

%


18.4

%

Operating margin(2)


28.3

%


29.8

%


28.8

%


29.1

%


28.1

%

Net income


23.6

%


25.8

%


26.8

%


24.9

%


26.7

%

















































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


Nine Months Ended

(In thousands, except per share amounts)


September 26,
 2014


June 27,
 2014


September 27,
 2013


September 26,
 2014


September 27,
 2013

Operating margin (non-GAAP)


$

141,320



$

146,567



$

128,331



$

422,482



$

358,601


Compensation (benefit)/expense — deferred compensation plan


(487)



3,126



3,462



4,093



6,724


Income from operations (GAAP)


$

141,807



$

143,441



$

124,869



$

418,389



$

351,877


 


ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)






(In thousands, except par value amount)


September 26,
 2014


December 31,
 2013








Assets







Current assets:







Cash and cash equivalents


$

2,680,085



$

2,869,158


Short-term investments


134,059



141,487


Total cash, cash equivalents, and short-term investments


2,814,144



3,010,645


Accounts receivable, net


406,708



483,032


Inventories


186,338



163,880


Deferred income taxes — current


54,402



63,228


Deferred compensation plan — marketable securities


65,492



66,455


Deferred compensation plan — restricted cash equivalents


15,897



16,699


Other current assets


41,260



48,901


Total current assets


3,584,241



3,852,840


Property and equipment, net


197,213



204,142


Long-term investments


1,744,830



1,695,066


Deferred income taxes — non-current


21,929



10,806


Goodwill


74,341



73,968


Acquisition-related intangible assets, net


74,756



82,150


Other assets, net


83,720



76,676


Total assets


$

5,781,030



$

5,995,648









Liabilities and stockholders' equity







Current liabilities:







Accounts payable


$

47,910



$

44,163


Accrued liabilities


41,403



41,218


Accrued compensation and related liabilities


73,354



51,105


Deferred compensation plan obligations


81,389



83,154


Deferred income and allowances on sales to distributors


397,002



487,746


Total current liabilities


641,058



707,386


Income taxes payable — non-current


310,199



276,326


Long-term debt


1,492,436



1,491,466


Other non-current liabilities


7,629



8,403


Total liabilities


2,451,322



2,483,581


Stockholders' equity:







Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 305,851 shares at September 26, 2014 and 317,769 shares at December 31, 2013


306



318


Capital in excess of par value


1,171,744



1,216,826


Retained earnings


2,163,647



2,322,885


Accumulated other comprehensive loss


(5,989)



(27,962)


Total stockholders' equity


3,329,708



3,512,067


Total liabilities and stockholders' equity


$

5,781,030



$

5,995,648









 

 

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)






Nine Months Ended

 (In thousands)


September 26,
 2014


September 27,
 2013








Cash Flows from Operating Activities:







Net income


$

361,527



$

341,131


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







Depreciation and amortization


42,426



34,256


Amortization of acquisition-related intangible assets


7,394



2,974


Amortization of debt discount and debt issuance costs


2,337



844


Stock-based compensation


70,518



73,011


Net gain on sale of available-for-sale securities


(150)



(129)


Amortization of investment discount/premium


1,900



2,575


Deferred income tax expense/(benefit)


11,509



(5,629)


Tax effect of employee stock plans


7,434



5,405


Excess tax benefit from employee stock plans


(4,719)



(4,165)


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







Accounts receivable, net


76,324



(111,231)


Inventories


(22,458)



(2,494)


Other assets


3,939



28,673


Accounts payable and other liabilities


32,581



12,509


Deferred income and allowances on sales to distributors


(90,744)



95,961


Income taxes payable


21,477



(8,753)


Deferred compensation plan obligations


(5,858)



(5,489)


Net cash provided by operating activities


515,437



459,449


Cash Flows from Investing Activities:







Purchases of property and equipment


(34,946)



(31,216)


Sales of deferred compensation plan securities, net


5,858



5,489


Purchases of available-for-sale securities


(276,867)



(258,809)


Proceeds from sale of available-for-sale securities


79,424



84,900


Proceeds from maturity of available-for-sale securities


175,280



143,392


Acquisitions, net of cash acquired




(145,321)


Purchases of intangible assets


(1,269)




Purchases of other investments


(8,224)



(2,101)


Net cash used in investing activities


(60,744)



(203,666)


Cash Flows from Financing Activities:







Proceeds from issuance of common stock through stock plans


29,871



38,748


Shares withheld for employee taxes


(20,852)



(24,787)


Payment of dividends to stockholders


(149,844)



(112,175)


Holdback payment for prior acquisition


(3,353)




Payment of debt assumed in acquisitions




(22,000)


Long-term debt and credit facility issuance costs


(1,321)




Repurchases of common stock


(502,986)



(60,276)


Excess tax benefit from employee stock plans


4,719



4,165


Net cash used in financing activities


(643,766)



(176,325)


Net (decrease)/increase in cash and cash equivalents


(189,073)



79,458


Cash and cash equivalents at beginning of period


2,869,158



2,876,627


Cash and cash equivalents at end of period


$

2,680,085



$

2,956,085


 

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SOURCE Altera Corporation



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