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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