Altera Announces Second Quarter Results

Jul 23, 2015, 16:15 ET from Altera Corporation

SAN JOSE, Calif., July 23, 2015 /PRNewswire/ -- Altera Corporation (NASDAQ: ALTR) today announced second quarter sales of $414.2 million, down 5 percent from the first quarter of 2015 and down 16 percent from the second quarter of 2014. Second quarter net income was $70.3 million, $0.23 per diluted share, compared with net income of $94.9 million, $0.31 per diluted share, in the first quarter of 2015 and $127.0 million, $0.41 per diluted share, in the second quarter of 2014.

Year-to-date cash flow from operating activities was $225.9 million. Altera's board of directors has declared a quarterly cash dividend of $0.18 per share, to be paid on September 1, 2015 to shareholders of record on August 10, 2015.

"Our wireless customers reduced demand on us this quarter, as expected, in reaction to continuing adverse market conditions. This pause in wireless spend more than offset growth across many of our vertical markets," said John Daane, president, chief executive officer, and chairman of the board. "The most important news for the second quarter was the June 1st announcement of an agreement for Intel to acquire Altera. Over the past several years we have worked closely with Intel, the world's largest semiconductor company and a proven technology leader. Through that interaction, we understand well the benefits this transaction will bring to our customers through development of innovative market-leading FPGAs and SoCs that will be enabled by Intel and Altera joining forces."

Second Quarter Business Summary

As previously forecasted, Altera's sales declined sequentially with Telecom and Wireless sales down sharply, attributable in large measure to the company's wireless business. With a few exceptions, there was broad growth across the remainder of the company. Gross margin was 69.4%, significantly improved from first quarter levels, as a result of favorable vertical market mix. Operating expense increased sequentially, largely the result of $18.5 million in merger-related expenses. The company's tax rate was 17.7%, higher than anticipated, largely due to adverse geographic mix of earnings. Altera did not repurchase any of its shares during the quarter.

In light of the company's pending acquisition by Intel, Altera will no longer provide forward-looking guidance.

Recent accomplishments mark Altera's continuing progress:

  • Altera has revealed architectural and product details of its Stratix® 10 FPGAs and SoCs, the next generation of high-end programmable logic devices, delivering breakthrough levels of performance, integration, density and security.
    • Stratix 10 FPGAs and SoCs leverage Altera's revolutionary HyperFlex™ FPGA fabric architecture, the FPGA industry's most significant fabric architecture innovation in over a decade. The HyperFlex fabric and Altera's use of Intel's® 14 nm Tri-Gate process, with its full process node advantage, provides 2X higher core performance over Altera's previous high-end family.
    • All members of the Stratix 10 FPGA and SoC family leverage heterogeneous 3D SiP (System in Package) integration to efficiently and economically integrate a high-density monolithic FPGA core fabric (up to 5.5M logic elements) with other advanced components, thereby increasing the scalability and flexibility of Stratix 10 FPGAs and SoCs. Altera's heterogeneous SiP integration is enabled through the use of Intel's proprietary EMIB (Embedded Multi-die Interconnect Bridge) technology, which provides higher performance, reduced complexity, lower cost and enhanced signal integrity compared with interposer-based approaches.
    • All densities in the Stratix 10 family will also be available with an integrated 64-bit ARM® quad-core CortexTM-A53 hard processor system. With these Stratix10 SoCs, Altera will extend its industry leadership position as the only vendor to offer high-end SoC FPGAs.
  • Altera has announced its Spectra-Q™ engine, a new technology at the heart of the company's proven Quartus® II software, to improve design productivity and time-to-market for next-generation programmable devices. As FPGAs and SoCs deliver dramatically increased capabilities with multi-million logic element devices, the Spectra-Q engine is a combination of software technologies that dramatically accelerate the design process by reducing design iterations, while continuing to deliver the industry's fastest compile times. The Spectra-Q engine features faster algorithms and allows for incremental design changes without needing to perform a full design compile. Built on top of the Spectra-Q engine is an industry-first platform design tool called BluePrint that allows designers to assign interfaces with greater efficiency. This tool reduces design iterations by 10X compared to the number of design iterations without the use of this tool by allowing designers to explore and create legal IO placements up-front with real-time fitter-checking. The Spectra-Q engine is available today to early access customers.
  • Altera has joined the Industrial Internet Consortium, a collaborative industry organization facilitating development of a global ecosystem for the Internet of Things (IoT). Founded by AT&T, Cisco, General Electric, IBM and Intel in March 2014, the Industrial Internet Consortium catalyzes and coordinates the priorities and enabling technologies of the Industrial Internet. Altera FPGA, SoC and power products already play a significant role in enabling connectivity in RF wireless systems and machine-to-machine communication networks. Programmable logic is applied extensively in factory automation and smart grid applications, supporting high-performance control and analytics that enhance the efficiency, safety and security in advanced manufacturing and power systems. FPGAs are also being deployed in next-generation automotive and medical IoT systems, and in smart city applications, such as intelligent lighting and traffic management systems that incorporate high-performance embedded vision and video analytics capabilities.

 

SELECTED SECOND QUARTER RATIOS AND RELATED RESULTS

($ in thousands)  Key Ratios & Information

June 26, 2015

March 27, 2015

Current Ratio

5:1

5:1

Liabilities/Equity

3:4

3:4

Quarterly Operating Cash Flows

$

89,220

$

136,633

TTM Return on Equity

12

%

13

%

Quarterly Depreciation Expense

$

11,985

$

12,777

Quarterly Capital Expenditures

$

7,696

$

33,245

Inventory MSOH (1): Altera

4.2

3.0

Inventory MSOH (1): Distribution

0.7

0.7

Cash Conversion Cycle (Days)

162

149

Turns

46

%

41

%

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 26,   2015

March 27,   2015

June 27,   2014

Sequential  Change

Year-

Over-Year

Change

Geography

Americas

20

%

17

%

16

%

10

%

6

%

Asia Pacific

41

%

45

%

43

%

(11)

%

(18)

%

EMEA

27

%

27

%

27

%

(7)

%

(17)

%

Japan

12

%

11

%

14

%

3

%

(28)

%

Net Sales

100

%

100

%

100

%

(5)

%

(16)

%

Product Category

New

53

%

59

%

53

%

(14)

%

(14)

%

Mainstream

23

%

19

%

21

%

13

%

(11)

%

Mature and Other

24

%

22

%

26

%

5

%

(22)

%

Net Sales

100

%

100

%

100

%

(5)

%

(16)

%

Vertical Market

Telecom & Wireless

31

%

42

%

46

%

(31)

%

(44)

%

Industrial Automation, Military & Automotive

27

%

21

%

21

%

22

%

10

%

Networking, Computer & Storage

18

%

17

%

15

%

3

%

4

%

Other

24

%

20

%

18

%

15

%

11

%

Net Sales

100

%

100

%

100

%

(5)

%

(16)

%

FPGAs and CPLDs

FPGA

83

%

84

%

84

%

(7)

%

(17)

%

CPLD

11

%

8

%

8

%

23

%

11

%

Other Products

6

%

8

%

8

%

(17)

%

(31)

%

Net Sales

100

%

100

%

100

%

(5)

%

(16)

%

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.

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 absolute and relative product performance and features, Stratix® 10 FPGA competitive advantages and market expansion potential, future product availability, and the potential benefits that may be delivered through the pending acquisition of Altera by Intel. 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, the risk that the acquisition of Altera by Intel will not be completed, 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 FPGA, SoC, CPLD products, and complementary technologies, such as power solutions, 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

Six Months Ended

(In thousands, except per share amounts)

June 26,   2015

March 27,   2015

June 27,   2014

June 26,   2015

June 27,   2014

Net sales

$

414,162

$

435,485

$

491,517

$

849,647

$

952,609

Cost of sales

126,590

156,263

162,391

282,853

314,259

Gross margin

287,572

279,222

329,126

566,794

638,350

Operating expense

Research and development expense

105,345

103,231

101,121

208,576

198,778

Selling, general, and administrative expense

75,011

70,506

78,974

145,517

153,481

Amortization of acquisition-related intangible assets

2,427

2,464

2,464

4,891

4,929

Merger expenses

18,458

18,458

Total operating expense

201,241

176,201

182,559

377,442

357,188

Operating margin (2)

86,331

103,021

146,567

189,352

281,162

Compensation expense — deferred compensation plan

2,732

27

3,126

2,759

4,580

Gain on deferred compensation plan securities

(2,732)

(27)

(3,126)

(2,759)

(4,580)

Interest income and other

(8,495)

(6,596)

(7,819)

(15,091)

(13,804)

Gain reclassified from other comprehensive income

(1,463)

(2,506)

(43)

(3,969)

(91)

Interest expense

10,859

10,408

10,877

21,267

21,365

Income before income taxes

85,430

101,715

143,552

187,145

273,692

Income tax expense

15,091

6,863

16,548

21,954

30,174

Net income

70,339

94,852

127,004

165,191

243,518

Other comprehensive (loss)/income:

Unrealized (loss)/gain on investments:

Unrealized holding (loss)/gain on investments arising during period, net of tax of ($460), $41, $23, ($419) and $46

(24,805)

16,785

14,471

(8,020)

27,031

Less: Reclassification adjustments for gain on investments included in net income, net of tax of $9, $6, $6, $15 and $10

(1,454)

(2,500)

(37)

(3,954)

(81)

Other comprehensive (loss)/income

(26,259)

14,285

14,434

(11,974)

26,950

Comprehensive income

$

44,080

$

109,137

$

141,438

$

153,217

$

270,468

Net income per share:

Basic

$

0.23

$

0.31

$

0.41

$

0.55

$

0.78

Diluted

$

0.23

$

0.31

$

0.41

$

0.54

$

0.77

Shares used in computing per share amounts:

Basic

301,799

301,308

311,000

301,561

313,713

Diluted

304,604

303,285

313,513

303,951

316,145

Dividends per common share

$

0.18

$

0.18

$

0.15

$

0.36

$

0.30

Tax rate

17.7

%

6.7

%

11.5

%

11.7

%

11.0

%

% of Net sales:

Gross margin

69.4

%

64.1

%

67.0

%

66.7

%

67.0

%

Research and development (1)

26.0

%

24.3

%

21.1

%

25.1

%

21.4

%

Selling, general, and administrative

18.1

%

16.2

%

16.1

%

17.1

%

16.1

%

Operating margin(2)

20.8

%

23.7

%

29.8

%

22.3

%

29.5

%

Net income

17.0

%

21.8

%

25.8

%

19.4

%

25.6

%

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, amortization of acquisition-related intangible assets, and merger 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

Six Months Ended

(In thousands, except per share amounts)

June 26,   2015

March 27,   2015

June 27,   2014

June 26,   2015

June 27,   2014

Operating margin (non-GAAP)

$

86,331

$

103,021

$

146,567

$

189,352

$

281,162

Compensation expense — deferred compensation plan

2,732

27

3,126

2,759

4,580

Income from operations (GAAP)

$

83,599

$

102,994

$

143,441

$

186,593

$

276,582

 

ALTERA CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value amount)

June 26,   2015

December 31,   2014

Assets

Current assets:

Cash and cash equivalents

$

1,852,753

$

2,426,367

Short-term investments

221,333

151,519

Total cash, cash equivalents, and short-term investments

2,074,086

2,577,886

Accounts receivable, net

424,427

377,964

Inventories

177,654

153,387

Deferred income taxes — current

58,645

56,048

Deferred compensation plan — marketable securities

65,378

69,367

Deferred compensation plan — restricted cash equivalents

14,484

14,412

Other current assets

53,888

39,479

Total current assets

2,868,562

3,288,543

Property and equipment, net

210,980

194,840

Long-term investments

2,448,942

1,942,343

Deferred income taxes — non-current

18,669

20,077

Goodwill

74,341

74,341

Acquisition-related intangible assets, net

67,400

72,291

Other assets, net

95,562

81,791

Total assets

$

5,784,456

$

5,674,226

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

51,618

$

49,140

Accrued liabilities

44,421

28,384

Accrued compensation and related liabilities

57,384

69,837

Deferred compensation plan obligations

79,862

83,779

Deferred income and allowances on sales to distributors

394,921

344,168

Total current liabilities

628,206

575,308

Income taxes payable — non-current

336,173

313,447

Long-term debt

1,493,406

1,492,759

Other non-current liabilities

6,878

6,886

Total liabilities

2,464,663

2,388,400

Stockholders' equity:

Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 302,467 shares at June 26, 2015 and 302,430 shares at December 31, 2014

302

302

Capital in excess of par value

1,207,688

1,165,259

Retained earnings

2,114,132

2,110,620

Accumulated other comprehensive (loss)/income

(2,329)

9,645

Total stockholders' equity

3,319,793

3,285,826

Total liabilities and stockholders' equity

$

5,784,456

$

5,674,226

 

ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Six Months Ended

 (In thousands)

June 26,   2015

June 27,   2014

Cash Flows from Operating Activities:

Net income

$

165,191

$

243,518

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

Depreciation and amortization

27,981

28,731

Amortization of acquisition-related intangible assets

4,891

4,929

Amortization of debt discount and debt issuance costs

1,558

1,558

Stock-based compensation

42,342

48,068

Net gain on sale of available-for-sale securities

(3,969)

(91)

Amortization of investment discount/premium

5,243

1,300

Deferred income tax expense

1,770

1,573

Tax effect of employee stock plans

2,776

121

Excess tax benefit from employee stock plans

(2,881)

(612)

Changes in assets and liabilities:

Accounts receivable, net

(46,463)

30,473

Inventories

(24,267)

(12,848)

Other assets

(9,990)

(2,751)

Accounts payable and other liabilities

6,558

5,703

Deferred income and allowances on sales to distributors

50,753

(72,547)

Income taxes payable and receivable, net

11,036

30,592

Deferred compensation plan obligations

(6,676)

(6,329)

Net cash provided by operating activities

225,853

301,388

Cash Flows from Investing Activities:

Purchases of property and equipment

(43,339)

(21,614)

Sales of deferred compensation plan securities, net

6,676

6,329

Purchases of available-for-sale securities

(1,298,609)

(204,810)

Proceeds from sale of available-for-sale securities

634,838

58,015

Proceeds from maturity of available-for-sale securities

69,711

134,212

Purchases of intangible assets

(5,257)

(535)

Purchases of other investments

(2,000)

(8,224)

Net cash used in investing activities

(637,980)

(36,627)

Cash Flows from Financing Activities:

Proceeds from issuance of common stock through stock plans

18,709

22,696

Shares withheld for employee taxes

(17,125)

(11,240)

Payment of dividends to stockholders

(108,445)

(94,179)

Holdback payment for prior acquisition

(3,353)

Long-term debt and credit facility issuance costs

(1,321)

Repurchases of common stock

(57,507)

(358,808)

Excess tax benefit from employee stock plans

2,881

612

Net cash used in financing activities

(161,487)

(445,593)

Net decrease in cash and cash equivalents

(573,614)

(180,832)

Cash and cash equivalents at beginning of period

2,426,367

2,869,158

Cash and cash equivalents at end of period

$

1,852,753

$

2,688,326

 

Logo - http://photos.prnewswire.com/prnh/20101012/SF78952LOGO

 

SOURCE Altera Corporation



RELATED LINKS

http://www.altera.com