Altera Announces Record Third Quarter Results

Oct 19, 2010, 16:15 ET from Altera Corporation

SAN JOSE, Calif., Oct. 19 /PRNewswire-FirstCall/ -- Altera Corporation (Nasdaq: ALTR) today announced third quarter sales of $527.5 million, up 12 percent from the second quarter of 2010 and up 84 percent from the third quarter of 2009. New product sales increased 24 percent sequentially. Third quarter net income was $217.5 million, $0.69 per diluted share, compared with net income of $180.6 million, $0.58 per diluted share, in the second quarter of 2010 and $56.7 million, $0.19 per diluted share, in the third quarter of 2009.

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Year-to-date cash flow from operating activities was $646.5 million. Altera ended the quarter with $2.4 billion in cash and short-term investments.

Altera's board of directors has declared a quarterly cash dividend of $0.06 per share payable on December 1, 2010 to stockholders of record on November 10, 2010.

"The combination of a step up in telecom and wireless demand and stellar new product growth created another quarter of double-digit sales gains for Altera. The 53 percent sequential growth we saw in our 40-nm FPGAs demonstrates the attractiveness of Altera's FPGAs in today's marketplace," said John Daane, president, chief executive officer, and chairman of the board. "We are in the final stages of development for our initial 28-nm FPGAs and believe that the unique architectural features and performance we offer will extend our current 40-nm technology leadership to this next process node."

Several recent accomplishments mark the company's continuing progress:

  • Altera has reached a significant milestone in the development of its next-generation 28-nm FPGA by becoming the first company to successfully demonstrate 25-Gbps transceiver performance in programmable logic. Altera achieved this milestone in its 28-nm Stratix® V transceiver test chip, a prototyping platform that Altera developed, leveraging its close relationship with foundry partner TSMC. Reaching the 25-Gbps milestone more than doubles the transceiver performance in currently available FPGA solutions, and rivals or exceeds the abilities of competing ASSP offerings. Today, Altera is the only company shipping production FPGAs with transceivers operating at 11.3 Gbps. Being the first vendor to reach the 25-Gbps milestone further extends Altera's leadership in transceiver technology.
  • Altera has launched its Embedded Initiative which offers a new system-level integration tool that provides a single FPGA design flow supporting a range of embedded processor offerings based on ARM®, Intel®, and MIPS® architectures, as well as Altera's Nios® II processor. This initiative will expand Altera's current embedded partner programs by embracing the broad ecosystems from ARM, Intel, and MIPS, as well as the FPGA world. Intel previously announced a new configurable Atom®-based processor that pairs an Altera® FPGA with an Intel E600 series Atom processor in a multi-chip single package solution. In addition, Altera has unveiled an agreement with ARM to license a range of technologies, including the Cortex™-A9 microprocessor. In early 2011 Altera will broaden its soft-processor cores to include the MIPS Technologies MIPS32® processor which will complement Altera's current Nios II soft-core processor. The combination of FPGAs and processors has the potential to create new levels of customization in embedded system design, and Altera's single design flow reduces overall system design cost, achieves fast time to market, and increases design flexibility.

Business Outlook for the Fourth Quarter 2010

Sequential Sales Growth

Up 3% to 6%

Gross Margin

70% to 71%

Research and Development

$65 to 66 million

SG&A

$61 to 62 million

Tax Rate

11% to 13%

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.

Fourth Quarter Update, 2011 Guidance and Conference Call

Altera's fourth quarter business update will be issued in a press release available after the market close on November 29, 2010. In addition, the press release will contain Altera's 2011 guidance.  Further, the company will schedule a conference call at 1:45 p.m. Pacific Time on November 29, 2010 to discuss Altera's 2011 guidance and fourth quarter update. The web cast and replay will be publicly available and accessible through the Investor Relations section of the company's web site at www.altera.com.

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 any projection of revenue, gross margin, expense or other financial items discussed in the Business Outlook section of this press release, the potential for continued technology leadership at 28 nm, and the timing of the availability of the MIPS32 processor. 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 Arria® II, Cyclone® III, Stratix® III, Stratix IV FPGAs, MAX® II CPLDs and HardCopy® device families, changes in the mix of our business between prototyping and production-based demand, 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, NIOS, QUARTUS, STRATIX and all other words that are identified as trademarks are, unless noted otherwise, Reg. U.S. Pat. & Tm. Off. and/or trademarks of Altera Corporation in the U.S. and other countries. ARM, CORTEX are the trademarks of ARM Limited in the EU and other countries. Intel and Atom are trademarks of Intel in the U.S. and other countries. MIPS and MIPS32 are the trademarks of MIPS Technologies in the U.S. and other countries. All other product or service names are the property of their respective holders.

INVESTOR CONTACT

MEDIA CONTACT

Scott Wylie - Vice President

Mark Plungy - Senior Manager

Investor Relations

Public Relations

(408) 544-6996

(408) 544-6397

swylie@altera.com

newsroom@altera.com

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

Three Months Ended

Nine Months Ended

(In thousands, except per share amounts)

October 1, 2010

July 2, 2010

September 25, 2009

October 1, 2010

September 25, 2009

Net sales

$

527,453

$

469,300

$

286,612

$

1,399,048

$

830,415

Cost of sales

157,899

132,811

93,686

405,646

281,303

Gross margin

369,554

336,489

192,926

993,402

549,112

Operating expense

Research and development expense

67,896

65,625

70,097

197,861

193,268

Selling, general, and administrative expense

63,473

64,767

56,332

190,421

170,670

Total operating expense

131,369

130,392

126,429

388,282

363,938

Operating margin (1)

238,185

206,097

66,497

605,120

185,174

Compensation expense/(benefit) — deferred compensation plan

4,699

(3,642)

5,538

3,285

9,147

(Gain)/loss on deferred compensation plan securities

(4,699)

3,642

(5,538)

(3,285)

(9,147)

Interest income and other

(1,092)

(710)

(740)

(2,394)

(5,835)

Interest expense

1,098

1,103

1,225

3,492

3,884

Income before income taxes

238,179

205,704

66,012

604,022

187,125

Income tax expense

20,688

25,097

9,308

52,751

39,037

Net income

$

217,491

$

180,607

$

56,704

$

551,271

$

148,088

Net income per share:

Basic

$

0.70

$

0.59

$

0.19

$

1.81

$

0.50

Diluted

$

0.69

$

0.58

$

0.19

$

1.78

$

0.50

Shares used in computing per share amounts:

Basic

309,766

304,531

294,758

304,267

293,935

Diluted

317,069

310,757

297,545

310,367

295,961

Cash dividends per common share

$

0.06

$

0.05

$

0.05

$

0.16

$

0.15

Tax rate

8.7 

%

12.2 

%

14.1 

%

8.7 

%

20.9 

%

% of Net sales:

Gross margin

70.1 

%

71.7 

%

67.3 

%

71.0 

%

66.1 

%

Research and development

12.9 

%

14.0 

%

24.5 

%

14.1 

%

23.3 

%

Selling, general, and administrative

12.0 

%

13.8 

%

19.7 

%

13.6 

%

20.6 

%

Operating margin(1)

45.2 

%

43.9 

%

23.2 

%

43.3 

%

22.3 

%

Net income

41.2 

%

38.5 

%

19.8 

%

39.4 

%

17.8 

%

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

Nine Months Ended

(In thousands, except per share amounts)

October 1, 2010

July 2, 2010

September 25, 2009

October 1, 2010

September 25, 2009

Operating margin (non-GAAP)

$

238,185

$

206,097

$

66,497

$

605,120

$

185,174

Compensation expense/(benefit) - deferred compensation plan

4,699

(3,642)

5,538

3,285

9,147

Income from operations (GAAP)

$

233,486

$

209,739

$

60,959

$

601,835

$

176,027

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value amount)

October 1, 2010

December 31, 2009

Assets

Current assets:

Cash and cash equivalents

$

2,414,416

$

1,546,672

Accounts receivable, net

346,812

218,144

Inventories

108,153

69,705

Deferred income taxes — current

73,624

79,164

Deferred compensation plan — marketable securities

49,321

50,905

Deferred compensation plan — restricted cash equivalents

20,975

18,986

Other current assets

115,579

58,194

Total current assets

3,128,880

2,041,770

Property and equipment, net

163,151

174,516

Deferred income taxes — non-current

38,498

59,249

Other assets, net

20,921

17,696

Total assets

$

3,351,450

$

2,293,231

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

138,315

$

50,520

Accrued liabilities

23,717

32,256

Accrued compensation and related liabilities

85,972

49,862

Deferred compensation plan obligations

70,296

69,891

Deferred income and allowances on sales to distributors

385,550

281,885

Income taxes payable

1,009

5,547

Total current liabilities

704,859

489,961

Income taxes payable — non-current

215,079

210,967

Long-term credit facility

500,000

500,000

Other non-current liabilities

7,254

6,967

Total liabilities

1,427,192

1,207,895

Commitments and contingencies

(See "Note 10 — Commitments and Contingencies")

Stockholders' equity:

Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 312,445 at October 1, 2010 and 296,817 shares at December 31, 2009

312

297

Capital in excess of par value

722,017

372,098

Retained earnings

1,201,929

712,941

Total stockholders' equity

1,924,258

1,085,336

Total liabilities and stockholders' equity

$

3,351,450

$

2,293,231

Key Ratios & Information

Current Ratio

4:1      

4:1      

Liabilities/Equity

1:1      

1:1      

Quarterly Operating Cash Flows

$

267,953

$

176,352

TTM Return on Equity

48

%

27

%

Quarterly Depreciation Expense

$

6,489

$

6,839

Quarterly Capital Expenditures

$

1,975

$

1,824

Inventory MSOH (1): Altera

2.1

1.8

Inventory MSOH (1): Distribution

0.8

0.7

Cash Conversion Cycle

68

77

Note (1): MSOH: Months Supply On Hand

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended

October 1, 2010

September 25, 2009

Cash Flows from Operating Activities:

Net income

$

551,271

$

148,088

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

Depreciation and amortization

20,276

22,139

Stock-based compensation

44,898

47,840

Deferred income tax (benefit)/expense

(16,493)

1,441

Tax effect of employee stock plans

14,602

(2,642)

Excess tax benefit from employee stock plans

(12,879)

(510)

Gain on substantive termination of retiree medical plan

(6,488)

Changes in assets and liabilities:

Accounts receivable, net

(128,668)

(172,779)

Inventories

(38,448)

18,811

Other assets

(43,946)

29,164

Accounts payable and other liabilities

112,788

(9,078)

Deferred income and allowances on sales to distributors

103,665

87,458

Income taxes payable

42,358

31,246

Deferred compensation plan obligations

(2,880)

1,664

Net cash provided by operating activities

646,544

196,354

Cash Flows from Investing Activities:

Purchases of property and equipment

(6,325)

(9,236)

Sales (purchases) of deferred compensation plan securities, net

2,880

(1,664)

Purchases of intangible assets

(1,500)

(690)

Net cash used in investing activities

(4,945)

(11,590)

Cash Flows from Financing Activities:

Proceeds from issuance of common stock through various stock plans

284,776

19,049

Shares withheld for employee taxes

(19,880)

(10,632)

Payment of dividends to stockholders

(48,764)

(44,120)

Excess tax benefit from stock-based compensation

12,879

510

Principal payments on capital lease obligations

(2,866)

(2,375)

Net cash provided by (used in) financing activities

226,145

(37,568)

Net increase in cash and cash equivalents

867,744

147,196

Cash and cash equivalents at beginning of period

1,546,672

1,216,743

Cash and cash equivalents at end of period

$

2,414,416

$

1,363,939

ALTERA CORPORATION

NET SALES SUMMARY

(Unaudited)

Three Months Ended

Quarterly Growth Rate

October 1, 2010

July 2, 2010

September 25, 2009

Sequential Change

Year-

Over-Year

Change

Geography

Americas

20

%

20

%

23

%

16

%

64

%

Asia Pacific

44

%

41

%

38

%

19

%

115

%

EMEA

21

%

24

%

21

%

1

%

82

%

Japan

15

%

15

%

18

%

9

%

47

%

Net Sales

100

%

100

%

100

%

12

%

84

%

Product Category

New

44

%

40

%

26

%

24

%

211

%

Mainstream

29

%

29

%

34

%

9

%

57

%

Mature and Other

27

%

31

%

40

%

25

%

Net Sales

100

%

100

%

100

%

12

%

84

%

Vertical Market

Telecom & Wireless

45

%

42

%

40

%

21

%

107

%

Industrial Automation, Military & Auto

22

%

23

%

23

%

5

%

69

%

Networking, Computer & Storage

13

%

13

%

16

%

14

%

55

%

Other

20

%

22

%

21

%

3

%

80

%

Net Sales

100

%

100

%

100

%

12

%

84

%

FPGAs and CPLDs

FPGA

82

%

82

%

77

%

13

%

96

%

CPLD

11

%

12

%

15

%

6

%

36

%

Other Products

7

%

6

%

8

%

12

%

56

%

Net Sales

100

%

100

%

100

%

12

%

84

%

Product Category Description

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

SOURCE Altera Corporation



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