Altera Announces Second Quarter Results

News provided by

Altera Corporation

Jul 23, 2013, 04:15 ET

SAN JOSE, Calif., July 23, 2013 /PRNewswire/ -- Altera Corporation (NASDAQ: ALTR) today announced second quarter sales of $421.8 million, up 3 percent from the first quarter of 2013 and down 9 percent from the second quarter of 2012. Second quarter net income was $101.5 million, $0.31 per diluted share, compared with net income of $120.2 million, $0.37 per diluted share, in the first quarter of 2013 and $162.7 million, $0.50 per diluted share, in the second quarter of 2012.

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

Year-to-date cash flow from operating activities was $214.0 million. Altera repurchased 1.7 million shares of its common stock during the quarter at a cost of $55.0 million. Altera ended the quarter with $3.6 billion in cash and investments.

As previously announced, Altera's board of directors has declared a quarterly cash dividend of $0.15 per share, to be paid on September 3, 2013 to stockholders of record on August 12, 2013.

"As anticipated, the pace of business picked up, and backlog has increased," said John Daane, president, chief executive officer, and chairman of the board. "We have announced our next generation of FPGAs sourced by TSMC for 20 nm devices and, for the first time, Intel, for 14 nm FinFET devices. This combination gives us an ideal blend of manufacturing processes to optimize performance across our next generation of FPGAs. As the only major FPGA company with access to the generation-ahead Intel FinFET technology for our high end devices, which typically are about half of the FPGA market, our competitive advantage is substantial."

Several recent accomplishments mark the company's continuing progress:

  • Altera has announced its Generation 10 FPGAs and SoCs, offering system developers breakthrough levels of performance and power efficiencies. Stratix® 10 FPGAs and SoCs leverage Intel's 14 nm Tri-Gate process and an enhanced architecture to deliver core performance two times higher than current high-end Altera FPGAs, while enabling an up to 70 percent power savings. Stratix 10 FPGAs and SoCs provide more than 4 million logic elements (LEs) on a single die, 56-Gbps transceivers, a third-generation ultra-high-performance processor system, and multi-die 3D solutions capable of integrating SRAM, DRAM and ASICs.

    Arria® 10 FPGAs and SoCs use TSMC's 20 nm process and reinvent the midrange by simultaneously surpassing Altera's current high-end FPGAs in performance while delivering 40 percent lower power than today's midrange devices. Reflecting the industry trend toward silicon convergence, Arria 10 FPGAs and SoCs offer the highest degree of system integration available in midrange devices, including 1.15 million LEs, integrated hard intellectual property and a second-generation processor system that features a 1.5 GHz dual-core ARM® Cortex™-A9 processor. Arria 10 FPGAs and SoCs also provide four times greater bandwidth compared to the current generation, including 28-Gbps transceivers, and three times higher system performance.

    Early access customers are using the Quartus® II software today for Arria 10 product development.

    Initial samples of Arria 10 devices will be available in early 2014 with 14 nm Stratix 10 FPGA test chips coming in 2013.

  • Altera acquired Enpirion, Inc., the industry's leading provider of high-efficiency, integrated power conversion products known as PowerSoCs (power system-on-chip). The combination of Altera's FPGAs with Enpirion's PowerSoCs offers customers higher performance, lower system power, higher reliability, smaller footprint and faster time-to-market. Enpirion's key enabling power technologies—high-frequency switching, magnetics and packaging—are engineered into complete power system-on-chip products. Enpirion's portfolio of DC-DC converter PowerSoCs with integrated inductors enable the industry's smallest solution footprints and are recognized for their high efficiency, low noise, exceptional thermal performance, high reliability and ease-of-use. Unlike discrete power products, Enpirion's turnkey solutions give designers complete power systems that are fully simulated, characterized, validated and production qualified. Enpirion's technology, when used with an Altera FPGA, increases Altera's share of the customer's bill of materials while, at the same time, reducing the customer's overall bill of materials cost.

SELECTED SECOND QUARTER REVENUE AND RELATED RESULTS


Key New Product Devices

Sequential Comparisons

Stratix V

(22)

%

Stratix IV

11

%

Arria II

(13)

%

Arria V

113

%

Cyclone IV

17

%

Cyclone V

73

%

HardCopy IV

64

%







($ in thousands) Key Ratios & Information


June 28, 2013

March 29, 2013

Current Ratio

6:1

7:1

Liabilities/Equity

1:2

1:3

Quarterly Operating Cash Flows

$

64,565

$

149,478

TTM Return on Equity

15

%

17

%

Quarterly Depreciation Expense

$

10,285

$

10,175

Quarterly Capital Expenditures

$

7,221

$

5,984

Inventory MSOH (1): Altera

3.0

3.3

Inventory MSOH (1): Distribution

0.5

0.6

Cash Conversion Cycle (Days)

149

117

Turns

49

%

43

%

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

June 28,

2013

March 29,

2013

June 29,

2012

Sequential
Change

Year-

Over-Year

Change

Geography








Americas

17

%

20

%

17

%

(14)

%

(12)

%

Asia Pacific

39

%

38

%

46

%

4

%

(22)

%

EMEA

28

%

27

%

23

%

7

%

11

%

Japan

16

%

15

%

14

%

13

%

2

%

Net Sales

100

%

100

%

100

%

3

%

(9)

%













Product Category








New

41

%

39

%

31

%

6

%

20

%

Mainstream

28

%

29

%

30

%

0

%

(14)

%

Mature and Other

31

%

32

%

39

%

1

%

(28)

%

Net Sales

100

%

100

%

100

%

3

%

(9)

%













Vertical Market








Telecom & Wireless

42

%

41

%

45

%

4

%

(16)

%

Industrial Automation, Military & Automotive

22

%

22

%

19

%

3

%

2

%

Networking, Computer & Storage

18

%

18

%

18

%

0

%

(6)

%

Other

18

%

19

%

18

%

2

%

(8)

%

Net Sales

100

%

100

%

100

%

3

%

(9)

%













FPGAs and CPLDs








FPGA

83

%

85

%

85

%

1

%

(11)

%

CPLD

9

%

8

%

9

%

9

%

(10)

%

Other Products

8

%

7

%

6

%

22

%

19

%

Net Sales

100

%

100

%

100

%

3

%

(9)

%

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 Third Quarter 2013


Sales and Income Statement

Sequential Sales

5% to 9%

Gross Margin

Approximately 68%

Research and Development

$99 to 101 million

SG&A

$80 to 82 million

Tax Rate

12% to 13%

Diluted Share Count

Approximately 323 million

Turns

Low 40's

MSOH

Mid 3's


Vertical Market



Telecom & Wireless

Up

Industrial Automation, Military & Automotive

Up

Networking, Computer & Storage

Up

Other

Flat

Second 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 the competitive advantage related to the use of Intel's 14 nm process, product performance parameters, the availability of Arria 10 samples in 2014, 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.

Mobile Device Investor Information

Altera now provides highlights of its investor relations web page optimized for mobile users. Investors can equip their mobile devices with this new capability by linking to http://phx.corporate-ir.net/Mobile.view?c=83265.

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 subscribe to product update emails and newsletters. Visit www.altera.com.

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

Six Months Ended

(In thousands, except per share amounts)

June 28,

2013

March 29,

2013

June 29,

2012

June 28,

2013

June 29,

2012









Net sales

$

421,759

$

410,501

$

464,831

$

832,260

$

848,585

Cost of sales

135,104

126,083

141,315

261,187

256,149

Gross margin

286,655

284,418

323,516

571,073

592,436

Operating expense









Research and development expense

95,489

87,717

92,143

183,206

174,227

Selling, general, and administrative expense

77,869

78,600

71,796

156,469

141,581

Amortization of acquisition-related intangible assets

915

213

213

1,128

426

Total operating expense

174,273

166,530

164,152

340,803

316,234

Operating margin (1)

112,382

117,888

159,364

230,270

276,202

Compensation (benefit)/expense — deferred compensation plan

(160)

3,422

(2,313)

3,262

3,423

Loss/(gain) on deferred compensation plan securities

160

(3,422)

2,313

(3,262)

(3,423)

Interest income and other

(2,778)

(1,659)

(1,415)

(4,437)

(3,222)

Gain reclassified from other comprehensive income

(42)

(54)

(69)

(96)

(171)

Interest expense

3,389

2,465

2,116

5,854

3,053

Income before income taxes

111,813

117,136

158,732

228,949

276,542

Income tax expense/(benefit)

10,304

(3,053)

(3,947)

7,251

(1,971)

Net income

101,509

120,189

162,679

221,698

278,513











Other comprehensive (loss)/income:









Unrealized (loss)/gain on investments:









Unrealized holding (loss)/gain on investments arising during period, net of tax of ($47), ($5), $8 ($41) and $66

(9,031)

(1)

2,799

(9,032)

3,103

Less: Reclassification adjustments for gain on investments included in net income, net of tax of $5, $5, $1, $10 and $6

(37)

(49)

(3)

(86)

(23)


(9,068)

(50)

2,796

(9,118)

3,080

Unrealized gain on derivatives:









Unrealized gain on derivatives arising during period, net of tax of $34 and $42

—

—

63

—

77

Less: Reclassification adjustments for gain on derivatives included in net income, net of tax of $23 and $50

—

—

(42)

—

(92)


—

—

21

—

(15)

Other comprehensive (loss)/income

(9,068)

(50)

2,817

(9,118)

3,065

Comprehensive income

$

92,441

$

120,139

$

165,496

$

212,580

$

281,578











Net income per share:









Basic

$

0.32

$

0.38

$

0.51

$

0.69

$

0.87

Diluted

$

0.31

$

0.37

$

0.50

$

0.69

$

0.85











Shares used in computing per share amounts:









Basic

320,472

319,867

321,218

320,175

321,898

Diluted

323,527

323,021

325,285

323,279

326,172











Cash dividends paid per common share

$

0.10

$

0.10

$

0.08

$

0.20

$

0.16











Tax rate

9.2

%

(2.6)

%

(2.5)

%

3.2

%

(0.7)

%

% of Net sales:









Gross margin

68.0

%

69.3

%

69.6

%

68.6

%

69.8

%

Research and development

22.6

%

21.4

%

19.8

%

22.0

%

20.5

%

Selling, general, and administrative

18.5

%

19.1

%

15.4

%

18.8

%

16.7

%

Operating margin(1)

26.6

%

28.7

%

34.3

%

27.7

%

32.5

%

Net income

24.1

%

29.3

%

35.0

%

26.6

%

32.8

%



















Notes:









(1) 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

Six Months Ended

(In thousands, except per share amounts)

June 28,

2013

March 29,

2013

June 29,

2012

June 28,

2013

June 29,

2012

Operating margin (non-GAAP)

$

112,382

$

117,888

$

159,364

$

230,270

$

276,202

Compensation (benefit) expense — deferred compensation plan

(160)

3,422

(2,313)

3,262

3,423

Income from operations (GAAP)

$

112,542

$

114,466

$

161,677

$

227,008

$

272,779

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)







(In thousands, except par value amount)

June 28,

2013

December 31,

2012



Assets



Current assets:



Cash and cash equivalents

$

2,788,844

$

2,876,627

Short-term investments

164,835

140,958

Total cash, cash equivalents, and short-term investments

2,953,679

3,017,585

Accounts receivable, net

472,597

323,708

Inventories

134,298

152,721

Deferred income taxes — current

87,270

59,049

Deferred compensation plan — marketable securities

55,753

60,321

Deferred compensation plan — restricted cash equivalents

18,984

17,116

Other current assets

40,095

49,852

Total current assets

3,762,676

3,680,352

Property and equipment, net

200,823

206,148

Long-term investments

689,301

704,758

Deferred income taxes — non-current

5,009

17,082

Other assets, net

221,594

49,488

Total assets

$

4,879,403

$

4,657,828





Liabilities and stockholders' equity



Current liabilities:



Accounts payable

$

39,571

$

50,036

Accrued liabilities

31,072

29,005

Accrued compensation and related liabilities

37,654

40,606

Dividends payable

47,937

—

Deferred compensation plan obligations

74,737

77,437

Deferred income and allowances on sales to distributors

399,630

345,993

Total current liabilities

630,601

543,077

Income taxes payable — non-current

291,656

272,000

Long-term debt

500,000

500,000

Other non-current liabilities

8,948

9,304

Total liabilities

1,431,205

1,324,381

Stockholders' equity:



Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 319,580 shares at June 28, 2013 and 319,564 shares at December 31, 2012

320

320

Capital in excess of par value

1,180,183

1,122,555

Retained earnings

2,271,221

2,204,980

Accumulated other comprehensive (loss) income

(3,526)

5,592

Total stockholders' equity

3,448,198

3,333,447

Total liabilities and stockholders' equity

$

4,879,403

$

4,657,828





ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)









Six Months Ended

(In thousands)

June 28,

2013

June 29,

2012



Cash Flows from Operating Activities:



Net income

$

221,698

$

278,513

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



Depreciation and amortization

22,449

16,323

Amortization of acquisition-related intangible assets


1,128

426

Stock-based compensation

47,274

46,200

Deferred income tax benefit

(21,767)

(12,090)

Tax effect of employee stock plans

1,280

16,500

Excess tax benefit from employee stock plans

(1,148)

(16,434)

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



  Accounts receivable, net

(147,407)

(192,994)

  Inventories

21,649

(23,811)

  Other assets

29,351

6,019

  Accounts payable and other liabilities

(19,585)

(19,066)

  Deferred income and allowances on sales to distributors

50,886

94,299

  Income taxes payable

14,196

(16,658)

  Deferred compensation plan obligations

(5,961)

(1,925)

Net cash provided by operating activities

214,043

175,302

Cash Flows from Investing Activities:



  Purchases of property and equipment

(23,337)

(31,312)

  Proceeds from sales of deferred compensation plan securities, net

5,961

1,925

  Purchases of available-for-sale securities

(175,642)

(576,568)

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

155,981

92,643

  Acquisitions, net of cash acquired

(145,313)

—

  Purchases of other investments

(176)

—

Net cash used in investing activities

(182,526)

(513,312)

Cash Flows from Financing Activities:



  Proceeds from issuance of common stock through various stock plans

27,296

26,086

  Shares withheld for employee taxes

(6,722)

(6,562)

  Payment of dividends to stockholders

(64,048)

(51,558)

  Payment of debt assumed in acquisitions

(22,000)

—

  Proceeds from issuance of long term debt

—

500,000

  Repayment of credit facility

—

(500,000)

  Long-term debt and credit facility issuance costs

—

(5,244)

  Repurchases of common stock

(54,974)

(129,016)

  Excess tax benefit from employee stock plans

1,148

16,434

Net cash used in financing activities

(119,300)

(149,860)

Net decrease in cash and cash equivalents

(87,783)

(487,870)

Cash and cash equivalents at beginning of period

2,876,627

3,371,933

Cash and cash equivalents at end of period

$

2,788,844

$

2,884,063

SOURCE Altera Corporation