Altera Announces First Quarter Results

News provided by

Altera Corporation

Apr 19, 2012, 04:15 ET

SAN JOSE, Calif., April 19, 2012 /PRNewswire/ -- Altera Corporation (NASDAQ: ALTR) today announced first quarter sales of $383.8 million, down 16 percent from the fourth quarter of 2011 and down 28 percent from the first quarter of 2011. First quarter net income was $115.8 million, $0.35 per diluted share, compared with net income of $146.6 million, $0.45 per diluted share, in the fourth quarter of 2011 and $224.1 million, $0.68 per diluted share, in the first quarter of 2011.

(Logo: http://photos.prnewswire.com/prnh/20101012/SF78952LOGO)

Cash flow from operating activities was $89.8 million. Altera repurchased 220,449 shares of its common stock during the quarter at a cost of $8.2 million. Altera ended the quarter with $3.6 billion in cash and investments.

Altera's board of directors has declared a quarterly cash dividend of $0.08 per share payable on June 1, 2012 to stockholders of record on May 10, 2012.

"Demand in the last month of the quarter was generally lighter than forecasted, particularly from customers in the communications vertical market. In addition, we experienced some mix issues as we attempted to fulfill orders that arrived in the last month of the quarter. These factors were the major contributors to quarterly revenue that was well below our previous outlook. As we enter the second quarter, our backlog position has significantly improved reflecting stronger demand for our products. We expect a rebound in our business in the second quarter," said John Daane, president, chief executive officer, and chairman of the board. "Our portfolio of 28-nm FPGAs is displaying strong design-win momentum. We continue to benefit from both our incumbency position and a tailored architecture approach that optimizes the performance of each of our 28-nm FPGA families."

Several recent accomplishments mark the company's continuing progress:

  • Altera is now delivering production-qualified Stratix® V FPGAs, the industry's first fully production-qualified 28-nm FPGAs. Stratix V FPGAs are the only FPGAs manufactured using TSMC's 28-nm High Performance (28HP) process, which, when combined with the company's tailored architecture, produces the best logic fabric performance available today. The performance benefits offered by Altera's high-end FPGAs combined with its leading-edge process technology and feature advantages enable Stratix V FPGAs to displace ASICs and ASSPs and win over competitive FPGAs across the diverse markets accessible to FPGAs.  Initial software support for the Stratix V family became available in May 2010. Altera began shipping engineering samples of the industry's first high-end 28-nm FPGAs in April 2011 and moved to production in less than a year with eight Stratix V family members now in production. The Stratix V FPGA family includes an E variant which is rich in logic resources and GX, GS and GT variants which include the FPGA industry's only integrated transceivers operating up to 28 Gbps.
  • The first of Altera's Cyclone® V FPGAs, the only 28-nm low-cost FPGAs in the market, are now shipping. Availability of the Cyclone V family completes Altera's release of its 28-nm tailored product portfolio which offers a broad range of devices—from the highest bandwidth to the lowest power—to meet customers' specific design needs. The Cyclone V family is developed on TSMC's 28-nm Low Power (28LP) process, delivering the lowest power, lowest cost and optimal performance levels needed for today's high-volume, cost-sensitive applications. The family encompasses six variants allowing designers to choose the device that best meets their needs—the logic-only E, the 3.125 Gbps transceiver GX, the 5 Gbps transceiver GT, and the SE, SX and ST SoC FPGA variants with integrated dual-core ARM®-based Hard Processor Systems (HPSs).
  • Altera and TSMC have jointly developed the world's first heterogeneous 3D IC test vehicle using TSMC's Chip-on-Wafer-on-Substrate (CoWoS) integration process. Heterogeneous 3D ICs are one of the innovations enabling the industry's move beyond Moore's Law by stacking various technologies within a single device, including analog, logic and memory. Altera's vision for heterogeneous 3D ICs includes developing device derivatives that allow customers to mix and match silicon IP based on their application requirements. Altera will leverage its leadership position in FPGA technology to integrate various technologies with an FPGA, including CPUs, ASICs, ASSPs, memory and optics. CoWoS is an integrated process technology that attaches device silicon chips to a wafer through a chip on wafer (CoW) bonding process. The CoW chip is attached to the substrate to form the final component (CoW-on-Substrate), thereby avoiding manufacturing-induced warping that otherwise would limit the appeal of this new technology.

SELECTED FIRST QUARTER REVENUE AND RELATED RESULTS

Key New Product Devices

Sequential  Comparisons

Stratix V

(12)%

Stratix IV

(27)%

Arria II

25%

Cyclone IV

(12)%

HardCopy IV

(49)%

Vertical Markets

Sequential Comparisons

Comments

Telecom & Wireless

(20)%

Telecom and Wireless down



Industrial Automation,

Military & Automotive

(21)%

Industrial Automation and
Military down, Automotive up



Networking, Computer & Storage

(14)%

Networking and Computer &
Storage down



Other

(2)%






($ in thousands) 
Key Ratios & Information      


March 30, 2012

December 31, 2011

Current Ratio

4:1

4:1

Liabilities/Equity

1:2

1:2

Quarterly Operating Cash Flows

$

89,763

$

220,363

TTM Return on Equity

23%

28%

Quarterly Depreciation Expense

$

7,367

$

7,772

Quarterly Capital Expenditures

$

23,903

$

8,634

Inventory MSOH (1): Altera

2.9

2.7

Inventory MSOH (1): Distribution

0.7

0.6

Cash Conversion Cycle (Days)

91

90

Turns

46%

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

March 30,
2012

December 31,
2011

April 1,
2011

Sequential
Change

Year-

Over-Year

Change

Geography








Americas

18

%

21

%

21

%

(29)

%

(39)

%

Asia Pacific

43

%

40

%

38

%

(10)

%

(20)

%

EMEA

23

%

22

%

26

%

(13)

%

(36)

%

Japan

16

%

17

%

15

%

(19)

%

(22)

%

Net Sales

100

%

100

%

100

%

(16)

%

(28)

%

Product Category








New

26

%

27

%

18

%

(20)

%

1

%

Mainstream

32

%

33

%

33

%

(20)

%

(30)

%

Mature and Other

42

%

40

%

49

%

(11)

%

(38)

%

Net Sales

100

%

100

%

100

%

(16)

%

(28)

%

Vertical Market








Telecom & Wireless

41

%

43

%

42

%

(20)

%

(30)

%

Industrial Automation, Military & Automotive

22

%

24

%

24

%

(21)

%

(33)

%

Networking, Computer & Storage

17

%

16

%

15

%

(14)

%

(18)

%

Other

20

%

17

%

19

%

(2)

%

(28)

%

Net Sales

100

%

100

%

100

%

(16)

%

(28)

%

FPGAs and CPLDs








FPGA

83

%

82

%

81

%

(16)

%

(26)

%

CPLD

10

%

9

%

11

%

(11)

%

(35)

%

Other Products

7

%

9

%

8

%

(28)

%

(39)

%

Net Sales

100

%

100

%

100

%

(16)

%

(28)

%

Product Category Description

  • New Products include the Stratix® V (including GS, GT and GX), Stratix IV (including E, GX and GT), Arria® V, Arria II (including GX and GZ), Cyclone® V, Cyclone IV (including E and GX), MAX® V, and HardCopy® IV devices.
  • Mainstream Products include the Stratix III, Cyclone III, MAX II, and HardCopy III devices.
  • Mature and Other Products include the Stratix II (and GX), Stratix (and GX), Arria GX, Cyclone II, Cyclone, Classic™, MAX 3000A, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, HardCopy II, HardCopy, FLEX® series, APEX™ series, Mercury™, and Excalibur™ devices, configuration and other devices, intellectual property cores, and software and other tools.

Business Outlook for the Second Quarter 2012



Sales and Income Statement


Sequential Sales Growth

Up 14% to 18%

Gross Margin

70% +/- .5%

Research and Development

$93 to 95 million

SG&A

$72 to 74 million

Tax Rate

11 to 12%

Diluted Share Count

327 million

Turns

High 30%

MSOH

High 3's

Vertical Market

Telecom & Wireless

Telecom and Wireless both up

Industrial Automation,

Military & Automotive

Up overall, with Industrial Automation up, Automotive flat, and Military down

Networking, Computer & Storage

Both up

Other

Up

First 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.

Second Quarter Update

Altera's second quarter business update will be issued in a press release available after the market close on June 7, 2012.

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 an expectation of improvement in our business and in demand in the second quarter, as well as 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 from those currently anticipated, due to a number of factors, including without limitation, current global economic conditions, customer business environment, customer inventory levels, vertical market mix, market acceptance of the company's products, 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 and HardCopy®  IV device families, 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 system and semiconductor companies to rapidly and cost-effectively innovate, differentiate and win in their markets. Find out more about Altera's FPGA, CPLD and ASIC devices at www.altera.com. Follow Altera via Facebook, RSS and Twitter.

ALTERA, ARRIA, CYCLONE, HARDCOPY, 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

[email protected]

[email protected]

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



Three Months Ended

(In thousands, except per share amounts)

March 30,
2012

December 31,
2011

April 1,
2011





Net sales

$

383,754

$

457,804

$

535,813

Cost of sales

114,834

136,764

146,910

Gross margin

268,920

321,040

388,903

Operating expense





Research and development expense

82,297

90,295

74,408

Selling, general, and administrative expense

69,785

70,667

69,022

Total operating expense

152,082

160,962

143,430

Operating margin (1)

116,838

160,078

245,473

Compensation expense — deferred compensation plan

5,736

2,962

1,662

Gain on deferred compensation plan securities

(5,736)

(2,962)

(1,662)

Interest income and other

(1,807)

(1,039)

(885)

(Gain) loss reclassified from other comprehensive income

(102)

18

—

Interest expense

937

1,013

1,041

Income before income taxes

117,810

160,086

245,317

Income tax expense

1,976

13,475

21,248

Net income

115,834

146,611

224,069







Other comprehensive income:





Unrealized (loss)/gain on investments





Unrealized holding gain on investments arising during period, net of tax of $58 and
       $8

304

41

—

Less: Reclassification adjustments for (gain)/loss on investments included in net income,
       net of tax of $5 and $2

(20)

16

—


284

57

—

Unrealized (loss)/gain on derivatives





Unrealized gain on derivatives arising during period, net of tax of $8

14

—

—

Less: Reclassification adjustments for gain on derivatives included in net income,
       net of tax of $27

(50)

—

—


(36)

—

—

Other comprehensive income

248

57

—

Comprehensive income

$

116,082

$

146,668

$

224,069







Net income per share:





Basic

$

0.36

$

0.46

$

0.70

Diluted

$

0.35

$

0.45

$

0.68







Shares used in computing per share amounts:





Basic

322,586

321,553

321,020

Diluted

327,061

325,653

327,843







Cash dividends per common share

$

0.08

$

0.08

$

0.06







ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Continued

Tax rate

1.7

%

8.4

%

8.7

%

% of Net sales:





Gross margin

70.1

%

70.1

%

72.6

%

Research and development

21.4

%

19.7

%

13.9

%

Selling, general, and administrative

18.2

%

15.4

%

12.9

%

Operating margin(1)

30.4

%

35.0

%

45.8

%

Net income

30.2

%

32.0

%

41.8

%





Notes:





(1) We define operating margin as gross margin less research and development and selling, general and administrative expenses, 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

(In thousands, except per share amounts)

March 30,
2012

December 31,
2011

April 1,
2011

Operating margin (non-GAAP)

$

116,838

$

160,078

$

245,473

Compensation expense — deferred compensation plan

5,736

2,962

1,662

Income from operations (GAAP)

$

111,102

$

157,116

$

243,811

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value amount)

March 30,
2012

December 31,
2011



Assets



Current assets:



Cash and cash equivalents

$

3,420,182

$

3,371,933

Short-term investments

59,002

65,222

Total cash, cash equivalents, and short-term investments

3,479,184

3,437,155

Accounts receivable, net

271,392

232,273

Inventories

109,451

122,279

Deferred income taxes — current

66,051

58,415

Deferred compensation plan — marketable securities

57,736

54,041

Deferred compensation plan — restricted cash equivalents

22,791

17,938

Other current assets

41,557

52,710

Total current assets

4,048,162

3,974,811

Property and equipment, net

186,538

171,721

Long-term investments

79,321

74,033

Deferred income taxes — non-current

26,014

26,629

Other assets, net

39,034

35,074

Total assets

$

4,379,069

$

4,282,268





Liabilities and stockholders' equity



Current liabilities:



Accounts payable

$

62,733

$

52,154

Accrued liabilities

28,969

34,029

Accrued compensation and related liabilities

42,366

78,181

Deferred compensation plan obligations

80,527

71,979

Deferred income and allowances on sales to distributors

280,006

279,876

Income taxes payable

51

—

Credit facility

500,000

500,000

Total current liabilities

994,652

1,016,219

Income taxes payable — non-current

258,629

263,423

Other non-current liabilities

8,909

8,730

Total liabilities

1,262,190

1,288,372

Stockholders' equity:



Common stock: $.001 par value; 1,000,000 shares authorized; outstanding -  322,771 shares at March 30, 2012 and 322,054 shares at December 31, 2011

323

322

Capital in excess of par value

1,092,428

1,050,752

Retained earnings

2,024,013

1,942,955

Accumulated other comprehensive income (loss)

115

(133)

Total stockholders' equity

3,116,879

2,993,896

Total liabilities and stockholders' equity

$

4,379,069

$

4,282,268






ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


Three Months Ended

March 30,
2012

April 1,
2011


Cash Flows from Operating Activities:


Net income

$

115,834

$

224,069

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


Depreciation and amortization

8,160

7,561

Stock-based compensation

22,393

17,233

Deferred income tax (benefit) expense

(7,055)

700

Tax effect of employee stock plans

10,566

13,444

Excess tax benefit from employee stock plans

(10,044)

(11,334)

Changes in assets and liabilities:


Accounts receivable, net

(39,119)

52,944

Inventories

12,828

10,764

Other assets

6,416

31,491

Accounts payable and other liabilities

(28,462)

(51,169)

Deferred income and allowances on sales to distributors

130

1,068

Income taxes payable

(4,696)

1,312

Deferred compensation plan obligations

2,812

(1,074)

Net cash provided by operating activities

89,763

297,009

Cash Flows from Investing Activities:


Purchases of property and equipment

(23,903)

(4,905)

(Purchases) sales of deferred compensation plan securities, net

(2,812)

1,074

Purchases of available-for-sale securities

(47,174)

—

Proceeds from sale and maturity of available-for-sale securities

48,387

—

Net cash used in investing activities

(25,502)

(3,831)

Cash Flows from Financing Activities:


Proceeds from issuance of common stock through various stock plans

12,888

52,739

Shares withheld for employee taxes

(4,884)

(5,193)

Payment of dividends to stockholders

(25,822)

(19,273)

Repurchases of common stock

(8,238)

—

Excess tax benefit from stock-based compensation

10,044

11,334

Net cash (used in) provided by financing activities

(16,012)

39,607

Net increase in cash and cash equivalents

48,249

332,785

Cash and cash equivalents at beginning of period

3,371,933

2,765,196

Cash and cash equivalents at end of period

$

3,420,182

$

3,097,981

SOURCE Altera Corporation