Altera Announces Fourth Quarter Results

News provided by

Altera Corporation

Jan 23, 2014, 04:15 ET

SAN JOSE, Calif., Jan. 23, 2014 /PRNewswire/ -- Altera Corporation (NASDAQ: ALTR) today announced fourth quarter sales of $454.4 million, up 2 percent from the third quarter of 2013 and up 3 percent from the fourth quarter of 2012. Fourth quarter net income was $98.9 million, $0.31 per diluted share, compared with net income of $119.4 million, $0.37 per diluted share, in the third quarter of 2013 and $120.8 million, $0.37 per diluted share, in the fourth quarter of 2012.

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

Cash flow from operating activities in 2013 was $590.2 million. Altera repurchased 4.4 million shares of its common stock during the quarter at a cost of $140.8 million.

Altera's board of directors has declared a quarterly cash dividend of $0.15 per share, to be paid on March 3, 2014 to stockholders of record on February 10, 2014.

"Sales growth exceeded our expectations as a diverse blend of end markets grew sequentially. Once again, our new products were the quarter's growth drivers, with double digit growth, led by our 28 nm FPGAs," said John Daane, president, chief executive officer, and chairman of the board. "In the first quarter we will begin shipping our 20 nm mid-range Arria 10 devices, which deliver performance that exceeds that of our 28 nm high-end devices and can deliver up to 40 percent lower power consumption than our previous mid-range FPGA. With the fourth quarter release of Quartus II software Arria 10 edition, we became the first and today remain the only major FPGA vendor with fully available development software for a 20 nm FPGA family." 

Several recent accomplishments mark the company's continuing progress:

  • With release of Altera's Quartus II Software Arria® 10 Edition, Altera became the first FPGA supplier to offer full publicly available software support for a 20 nm FPGA. This release supports Arria 10 mid-range FPGAs and provides customers access to dramatic improvements in performance, power and system cost. Based on TSMC 20 nm process technology, Arria 10 FPGAs and SoCs effectively reinvent the mid-range FPGA and SoC category by simultaneously delivering a 15 percent performance gain over current high-end FPGAs and up to 40 percent lower power than previous mid-range devices. Customers can start developing Arria 10 FPGA- and SoC-based systems today using the familiar and proven Quartus II design environment with the fastest compile times in the industry. Arria 10 FPGAs and SoCs are optimized for systems that require high-performance features while being constrained by strict cost and power budgets. These mid-range devices leverage an advanced 20 nm process and include features tailored to address the requirements of a variety of end markets, including communications, broadcast, and computer and storage.
  • Altera received the Huawei 2013 Excellent Core Partner Award for outstanding support, high-quality standards and FPGA product innovation. The Huawei Excellent Core Partner Award is a distinguished recognition for companies that consistently deliver the highest performance and quality products that meet Huawei's highly specialized requirements. Altera was the only major programmable logic company to win an Excellent Core Partner Award at Huawei's 2013 Core Partner Convention, which was held in November. During 2013, Huawei delivered multiple wireline, wireless and enterprise infrastructure solutions to its customers based on Altera's 28 nm portfolio of products, ranging from the high-end Stratix® V to the low-cost Cyclone® V families of FPGAs. Telecommunications providers worldwide deploy Huawei's communications infrastructure offerings to upgrade their network architectures for the performance and capacity needed to handle the bandwidth expansion driven by the proliferation of internet-connected devices.
  • As the recipient of the Best Technical Support Award from ZTE, Altera has been recognized as a ZTE technical supplier who delivered the best technical support in 2013. ZTE holds an annual event in Shenzhen, China, to affirm and recognize the key role its suppliers play in growing the company's position as one of the world's leading innovators in the telecommunications equipment and networking industry. Altera's technologies, including FPGAs, CPLDs and power products, are used in ZTE's wireless, wireline and cloud computing offerings. ZTE's telecommunications equipment is used by the world's largest service providers.

SELECTED FOURTH QUARTER REVENUE AND RELATED RESULTS


Key New Product Devices

Sequential  Comparisons

Stratix V

36%

Stratix IV

4%

Arria II

0%

Arria V

5%

Cyclone IV

17%

Cyclone V

89%

HardCopy IV

23%

Enpirion PowerSoCs

(8)%



($ in thousands)





Key Ratios & Information      


December 31, 2013

September 27, 2013

Current Ratio

6:1

6:1

Liabilities/Equity

2:3

1:2

Quarterly Operating Cash Flows

$

130,759

$

245,406

TTM Return on Equity

13%

14%

Quarterly Depreciation Expense

$

11,321

$

10,772

Quarterly Capital Expenditures

$

14,253

$

8,633

Inventory MSOH (1): Altera

3.4

3.4

Inventory MSOH (1): Distribution

0.7

0.6

TTM Cash Conversion Cycle (Days)

160

158

Turns

45%

39%

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

Years Ended

December 31, 2013

September 27, 2013

December 31, 2012

Sequential Change

Year-

Over-Year

Change

December 31, 2013

December 31, 2012

Annual Growth

Geography














Americas

19%

18%

19%

5%

1%

18%

18%

(1)%

Asia Pacific

41%

39%

39%

5%

8%

40%

43%

(10)%

EMEA

24%

28%

28%

(11)%

(10)%

26%

25%

4%

Japan

16%

15%

14%

13%

20%

16%

14%

5%

Net Sales

100%

100%

100%

2%

3%

100%

100%

(3)%














Product Category














New

47%

44%

39%

10%

26%

43%

32%

31%

Mainstream

24%

26%

28%

(8)%

(13)%

27%

30%

(14)%

Mature and Other

29%

30%

33%

(1)%

(9)%

30%

38%

(22)%

Net Sales

100%

100%

100%

2%

3%

100%

100%

(3)%














Vertical Market














Telecom & Wireless

40%

41%

44%

0%

(6)%

41%

44%

(9)%

Industrial Automation, Military & Automotive

22%

23%

21%

(1)%

10%

22%

21%

4%

Networking, Computer & Storage

19%

19%

17%

3%

17%

19%

17%

6%

Other

19%

17%

18%

9%

7%

18%

18%

(3)%

Net Sales

100%

100%

100%

2%

3%

100%

100%

(3)%














FPGAs and CPLDs














FPGA

83%

82%

84%

3%

1%

83%

84%

(4)%

CPLD

9%

9%

9%

(2)%

8%

9%

9%

(4)%

Other Products

8%

9%

7%

(4)%

25%

8%

7%

9%

Net Sales

100%

100%

100%

2%

3%

100%

100%

(3)%

Product Category Description

  • New Products include the 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, Classic™, 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 First Quarter 2014

Sales and Income Statement

Sequential Sales Growth

- 2% to - 6%

Gross Margin

68% +/- .5%

Research and Development

$100 - $102 million

SG&A

$75 - $77 million

Other Income/Expense, Net (1)

Net expense of approximately $4 million

Tax Rate

12% - 13%

Diluted Share Count

Less than 322 million

Turns

Mid 40's

Inventory MSOH

Low 4's


Note (1): Other Income/ Expense, Net includes Interest income and other and Interest expense in our consolidated statements of comprehensive income.

Vertical Market



Telecom & Wireless

Up

Industrial Automation, Military & Automotive

Flat

Networking, Computer & Storage

Down

Other

Down

Fourth 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 product performance parameters, the Arria 10 shipping date, 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 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, 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. Follow Altera via Facebook, Twitter, LinkedIn, Google+ and RSS, and

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

Years Ended

(In thousands, except per share amounts)

December 31, 2013

September 27, 2013

December 31, 2012

December 31, 2013

December 31, 2012









Net sales

$

454,367

$

445,945

$

439,440

$

1,732,572

$

1,783,035

Cost of sales

144,024

141,525

133,367

546,736

541,523

Gross margin

310,343

304,420

306,073

1,185,836

1,241,512

Operating expense









Research and development expense

106,643

95,336

93,949

385,185

359,568

Selling, general, and administrative expense

84,692

78,907

74,030

320,068

289,854

Amortization of acquisition-related intangible assets

1,850

1,846

213

4,824

853

Total operating expense

193,185

176,089

168,192

710,077

650,275

Operating margin (1)

117,158

128,331

137,881

475,759

591,237

Compensation expense - deferred compensation plan

3,881

3,462

358

10,605

7,055

Gain on deferred compensation plan securities

(3,881)

(3,462)

(358)

(10,605)

(7,055)

Interest income and other

(4,902)

(2,214)

(2,390)

(11,553)

(8,388)

Gain reclassified from other comprehensive income

(24)

(33)

(205)

(153)

(268)

Interest expense

8,272

2,511

2,589

16,637

7,976

Income before income taxes

113,812

128,067

137,887

470,828

591,917

Income tax expense

14,878

8,635

17,082

30,763

35,110

Net income

$

98,934

$

119,432

$

120,805

$

440,065

$

556,807










Other comprehensive (loss)/ income:









Unrealized (loss)/gain on investments:









Unrealized holding (loss)/gain on investments arising during period, net of tax of ($11), $30, ($11), ($1) and $114

(26,811)

2,419

(889)

(33,424)

5,839

Less: Reclassification adjustments for gain on investments included in net income, net of tax of $2, $11, $24, $23 and $25

(22)

(22)

(44)

(130)

(114)

(26,833)

2,397

(933)

(33,554)

5,725

Unrealized gain on derivatives:









Unrealized gain on derivatives arising during period, net of tax of $9 and $45

—

—

17

—

84

Less: Reclassification adjustments for gain on derivatives included in net income, net of tax of $48 and $45

—

—

(89)

—

(84)

—

—

(72)

—

—

Other comprehensive (loss)/ income:

(26,833)

2,397

(1,005)

(33,554)

5,725

Comprehensive income

$

72,101

$

121,829

$

119,800

$

406,511

$

562,532









Net income per share:









Basic

$

0.31

$

0.37

$

0.38

$

1.37

$

1.74

Diluted

$

0.31

$

0.37

$

0.37

$

1.36

$

1.72









Shares used in computing per share amounts:









Basic

319,993

320,445

319,765

320,195

320,830

Diluted

322,018

323,505

322,209

323,018

324,497









Dividends per common share

$

0.15

$

0.15

$

0.10

$

0.50

$

0.36









Tax rate

13.1%

6.7%

12.4%

6.5%

5.9%

% of Net sales:









Gross margin

68.3%

68.3%

69.7%

68.4%

69.6%

Research and development

23.5%

21.4%

21.4%

22.2%

20.2%

Selling, general, and administrative

18.6%

17.7%

16.8%

18.5%

16.3%

Operating margin(1)

25.8%

28.8%

31.4%

27.5%

33.2%

Net income

21.8%

26.8%

27.5%

25.4%

31.2%


Notes:


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

Years Ended

(In thousands)

December 31, 2013

September 27, 2013

December 31, 2012

December 31, 2013

December 31, 2012

Operating margin (non-GAAP)

$

117,158

$

128,331

$

137,881

$

475,759

$

591,237

Compensation expense — deferred compensation plan

3,881

3,462

358

10,605

7,055

Income from operations (GAAP)

$

113,277

$

124,869

$

137,523

$

465,154

$

584,182

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except par value amount)

December 31,

2013

December 31,

2012



Assets



Current assets:



Cash and cash equivalents

$

2,869,158

$

2,876,627

Short-term investments

141,487

140,958

Total cash, cash equivalents, and short-term investments

3,010,645

3,017,585

Accounts receivable, net

483,032

323,708

Inventories

163,880

152,721

Deferred income taxes - current

63,228

59,049

Deferred compensation plan - marketable securities

66,455

60,321

Deferred compensation plan - restricted cash equivalents

16,699

17,116

Other current assets

48,901

49,852

Total current assets

3,852,840

3,680,352

Property and equipment, net

204,142

206,148

Long-term investments

1,695,066

704,758

Deferred income taxes - non-current

25,005

17,082

Goodwill

73,968

2,329

Acquisition-related intangible assets, net

82,150

4,874

Other assets, net

76,676

42,285

Total assets

$

6,009,847

$

4,657,828



Liabilities and stockholders' equity



Current liabilities:



Accounts payable

$

44,163

$

50,036

Accrued liabilities

41,218

29,005

Accrued compensation and related liabilities

51,105

40,606

Deferred compensation plan obligations

83,154

77,437

Deferred income and allowances on sales to distributors

487,746

345,993

Total current liabilities

707,386

543,077

Income taxes payable - non-current

290,525

272,000

Long-term debt

1,491,466

500,000

Other non-current liabilities

8,403

9,304

Total liabilities

2,497,780

1,324,381



Stockholders' equity:



Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 317,769 at December 31, 2013 and 319,564 shares at December 31, 2012

318

320

Capital in excess of par value

1,216,826

1,122,555

Retained earnings

2,322,885

2,204,980

Accumulated other comprehensive (loss)/ income

(27,962)

5,592

Total stockholders' equity

3,512,067

3,333,447

Total liabilities and stockholders' equity

$

6,009,847

$

4,657,828



ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)




YEARS ENDED

(In thousands)

December 31,

2013

December 31,

2012

December 31,

2011

Cash Flows from Operating Activities:





Net income

$

440,065

$

556,807

$

770,711

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





Depreciation and amortization

47,225

36,009

30,344

Amortization of  acquisition-related intangible assets

4,824

853

1,583

Amortization of debt discount and debt issuance costs

1,457

648

—

Stock-based compensation

96,624

93,586

82,750

Net gain on sale of available-for-sale securities

(153)

—

—

Amortization of investment discount/premium

3,407

—

—

Deferred income tax expense

3,581

8,824

15,657

Tax effect of employee stock plans

7,009

9,811

16,162

Excess tax benefit from employee stock plans

(4,716)

(16,278)

(17,307)

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





Accounts receivable, net

(157,842)

(91,435)

131,341

Inventories

(7,933)

(30,442)

24,245

Other assets

(1,309)

(3,698)

54,661

Accounts payable and other liabilities

9,414

(50,566)

(32,534)

Deferred income and allowances on sales to distributors

139,002

66,117

(148,836)

Income taxes payable

14,440

8,576

31,116

Deferred compensation plan obligations

(4,887)

(1,598)

(293)

Net cash provided by operating activities

590,208

587,214

959,600

Cash Flows from Investing Activities:





Purchases of property and equipment

(42,558)

(60,913)

(31,812)

Proceeds from sales of deferred compensation plan securities, net

4,887

1,598

293

Purchases of available-for-sale securities

(1,347,626)

(921,430)

(164,408)

Proceeds from sale of available-for-sale securities

136,791

105,411

11,903

Proceeds from maturity of available-for-sale securities

178,221

115,373

13,100

Acquisitions, net of cash acquired

(145,321)

—

—

Purchases of intangible assets

(13,465)

(2,280)

—

Purchase of other investments

(7,441)

(4,935)

—

Net cash used in investing activities

(1,236,512)

(767,176)

(170,924)

Cash Flows from Financing Activities:





Proceeds from issuance of common stock through stock plans

58,220

49,665

119,989

Shares withheld for employee taxes

(28,272)

(31,472)

(32,152)

Payment of dividends to stockholders

(160,377)

(115,514)

(90,060)

Payment of debt assumed in acquisitions

(22,000)

—

—

Proceeds from issuance of long-term debt

991,786

500,000

—

Repayment of credit facility

—

(500,000)

—

Long-term debt and credit facility issuance costs

(4,143)

(5,244)

—

Repurchases of common stock

(201,095)

(229,057)

(197,023)

Excess tax benefit from employee stock plans

4,716

16,278

17,307

Net cash provided by (used in) financing activities

638,835

(315,344)

(181,939)

Net (decrease) increase in cash and cash equivalents

(7,469)

(495,306)

606,737

Cash and cash equivalents at beginning of period

2,876,627

3,371,933

2,765,196

Cash and cash equivalents at end of period

$

2,869,158

$

2,876,627

$

3,371,933

Supplemental cash flow information:





Income taxes paid, net

$

16,299

$

9,797

$

9,856

Interest paid

$

10,865

$

6,898

$

3,704

SOURCE Altera Corporation