Altera Announces Fourth Quarter Results Sales Up Strongly

SAN JOSE, Calif.--()--Altera Corporation (NASDAQ:ALTR) today announced fourth quarter sales of $365.0 million, up 27 percent from the third quarter of 2009 and up 16 percent from the fourth quarter of 2008. New product sales increased 30 percent sequentially. Fourth quarter net income was $103.0 million, $0.34 per diluted share, compared with net income of $56.7 million, $0.19 per diluted share, in the third quarter of 2009 and $83.0 million, $0.28 per diluted share, in the fourth quarter of 2008.

“The fourth quarter produced extraordinary growth driven by customer program ramps and better end demand across all of our markets”

Sales for 2009 were $1.20 billion, a decrease of 13 percent compared with $1.37 billion in 2008. Net income was $251.1 million, $0.84 per diluted share, versus net income of $359.7 million, $1.18 per diluted share, in 2008.

For the year, cash flow from operating activities was $372.7 million. Altera ended 2009 with $1.5 billion in cash and short-term investments, an increase from $1.2 billion at 2008 year end.

Altera’s board of directors has declared a quarterly cash dividend of $0.05 per share payable on March 1, 2010 to shareholders of record on February 10, 2010.

"The fourth quarter produced extraordinary growth driven by customer program ramps and better end demand across all of our markets," said John Daane, president, chief executive officer, and chairman of the board. "Our new products were the growth leaders in a quarter that saw sequential improvements across all product and market segment categories. We believe that in 2010 our 40-nm product leadership will create an additional growth driver for the company as customers shift from the prototype stage to production-based demand."

Several recent accomplishments mark the company’s continuing progress.

  • Altera is now shipping production-qualified 40-nm Stratix® IV GT FPGAs, the industry's first FPGAs to feature integrated 11.3-Gbps transceivers. Stratix IV GT FPGAs are the only single-chip devices available today that meet the high-speed bandwidth requirements for next-generation framer, MAC, bridging and switching applications for 100-Gigabit Ethernet and 100-Gigabit Optical Transport Networks. Five of the top seven advanced optical transport suppliers have now selected Stratix IV GT FPGAs for their 100G development. Altera's 100G solutions include production silicon, 100G intellectual property, 100G reference designs and development boards supporting 100G applications.
  • Altera's Stratix IV GT FPGAs were recognized by EDN China with its prestigious “Best Product Award.” EDN China annually honors the products and people that shape the electronics industry. Finalists are nominated by a panel of judges that includes technical experts from industry, universities and institutes, as well as EDN China editors. The final award winners are selected by EDN China's 40,000 readers and website users. Altera's Stratix IV GT FPGAs received the most votes and won EDN China's “Best Product Award” in the programmable logic devices category.
  • Altera's Arria® II GX FPGAs were awarded the "Embedded System Editor's Choice Award" as the Best FPGA Product of the Year 2009 by China's Electronic Engineering & Product World (EEPW) Magazine. The award was presented during the Electronic Forum held at China's Tsinghua University in Beijing. The award is based on a combination of a judging committee made up of EEPW's editorial team, experts and engineers from industry associations and online votes.
  • Expanding on the success of the Cyclone® FPGA series and extending its transceiver leadership, the new Cyclone IV FPGA family has been announced. This new FPGA family responds to increased low-cost bandwidth needs driven by the demand for mobile video, voice, and data access, and the hunger for high-quality 3D images. With low power consumption and small packages, these devices address cost-sensitive, small form-factor applications in the wireless, wireline, broadcast, industrial and consumer markets. With a focus on low cost, the smallest Cyclone IV GX device is the industry's smallest FPGA with transceivers. Production shipments of the first Cyclone IV devices will begin in the first quarter of 2010.
  • Altera has released its Quartus® II software version 9.1, the industry's number-one software in performance and productivity for CPLD, FPGA and HardCopy® ASIC designs. New features and enhancements within Quartus II software v9.1 reduce compile times 20 percent versus the previous software release, while continuing to deliver on average 2X to 3X faster compile times compared to competing high-density 40-nm and 65-nm designs. Quartus II software v9.1 builds upon the productivity advantage Altera consistently delivers with its design software. The software provides the industry's fastest compile times for high-end FPGAs, averaging a 20 percent reduction annually over the past five years.

Business Outlook for the First Quarter 2010

Sequential Sales Growth   Up 5 to 10%
 
Gross Margin 67.5% to 68.5%
 
Research and Development $66 to 68 million
 
SG&A $59 to 61 million
 
Tax Rate 14 to 16%

Conference Call and Quarterly Update:

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 webcast 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.

Altera’s first quarter business update will be issued in a press release available after the market close on March 3, 2010.

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, and the contribution from 40-nm FPGAs to 2010 growth. 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, vertical market mix, market acceptance of the company's products, product introduction schedules, the rate of growth of the company's new products including the Arria® GX, Arria II GX, Cyclone® II, Cyclone III, Stratix® II, Stratix II GX, Stratix III, Stratix IV, Stratix IV GX, Stratix IV GT, MAX® II 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, The Programmable Solutions Company, the stylized Altera logo, specific device designations and all other words that are identified as trademarks and/or service marks are, unless noted otherwise, the trademarks and service marks of Altera Corporation in the U.S. and other countries. All other product or service names are the property of their respective holder.

ALTERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
         
THREE MONTHS ENDED YEARS ENDED
December 31, September 25, December 31, December 31, December 31,
  2009     2009     2008     2009     2008  
Net sales $ 364,998 $ 286,612 $ 314,544 $ 1,195,413 $ 1,367,224
Cost of sales(1)   115,281     93,686     96,699     396,584     449,750  
Gross margin 249,717 192,926 217,845 798,829 917,474
 
Operating expenses
Research and development(1) 66,940 70,097 68,846 260,208 257,717
Selling, general, and administrative(1)   63,404     56,332     62,757     234,074     255,391  
Total operating expenses   130,344     126,429     131,603     494,282     513,108  
 
Operating margin(2) 119,373 66,497 86,242 304,547 404,366
Compensation expense (benefit) - deferred compensation plan 2,629 5,538 (10,184 ) 11,776 (18,106 )
(Gain) loss on deferred compensation plan securities (2,629 ) (5,538 ) 10,184 (11,776 ) 18,106
Interest income and other (248 ) (740 ) (6,118 ) (6,083 ) (30,300 )
Interest expense   1,208     1,225     4,456     5,092     15,492  
 
Income before income taxes 118,413 66,012 87,904 305,538 419,174
Income tax expense   15,439     9,308     4,863     54,476     59,523  
 
Net income $ 102,974   $ 56,704   $ 83,041   $ 251,062   $ 359,651  
 
Net income per share:
Basic $ 0.35   $ 0.19   $ 0.28   $ 0.85   $ 1.20  
Diluted $ 0.34   $ 0.19   $ 0.28   $ 0.84   $ 1.18  
 
Shares used in computing per share amounts:
Basic   296,036     294,758     294,803     294,493     300,951  
Diluted   300,613     297,545     296,298     297,180     304,604  
 
Cash dividends per common share $ 0.05   $ 0.05   $ 0.05   $ 0.20   $ 0.19  
 
Tax rate 13.0 % 14.1 % 5.5 % 17.8 % 14.2 %
% of Net sales:
Gross margin 68.4 % 67.3 % 69.3 % 66.8 % 67.1 %
Research and development(1) 18.3 % 24.5 % 21.9 % 21.8 % 18.8 %
Selling, general, and administrative(1) 17.4 % 19.7 % 20.0 % 19.6 % 18.7 %
Operating margin(2) 32.7 % 23.2 % 27.4 % 25.5 % 29.6 %
Net income 28.2 % 19.8 % 26.4 % 21.0 % 26.3 %
 

Notes:

 

(1)

Includes restructuring expenses as follows:
 
THREE MONTHS ENDED YEARS ENDED
December 31, September 25, December 31, December 31, December 31,
  2009     2009     2008     2009     2008  
 
Cost of sales $ - $ 137 $ - $ 137 $ -
Research and development - 3,878 - 4,104 -
Selling, general, and administrative   -     738     -     5,728     -  
 
$ -   $ 4,753   $ -   $ 9,969   $ -  
 

(2)

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 ("US 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 YEARS ENDED
December 31, September 25, December 31, December 31, December 31,
  2009     2009     2008     2009     2008  
 
Operating margin (non-GAAP) $ 119,373 $ 66,497 $ 86,242 $ 304,547 $ 404,366
Compensation expense (benefit) - deferred compensation plan   2,629     5,538     (10,184 )   11,776     (18,106 )
 
Income from operations (GAAP) $ 116,744   $ 60,959   $ 96,426   $ 292,771   $ 422,472  
ALTERA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
     
December 31, September 25, December 31,
  2009     2009     2008  
 
Assets
 
Current assets:
Cash and cash equivalents $ 1,546,672 $ 1,363,939 $ 1,216,743
Accounts receivable, net 218,144 254,809 83,430
Inventories 69,705 65,826 84,637
Deferred compensation plan assets 69,891 66,801 55,990
Deferred income taxes and other current assets   137,358     166,779     186,361  
Total current assets 2,041,770 1,918,154 1,627,161
Property and equipment, net 174,516 179,531 192,262
Deferred income taxes and other assets, net   76,945     49,284     60,484  
$ 2,293,231   $ 2,146,969   $ 1,879,907  
 
Liabilities and Stockholders' Equity
 
Current liabilities:
Accounts payable and current liabilities $ 138,185 $ 117,642 $ 124,358
Deferred compensation plan obligations 69,891 66,801 55,990
Deferred income and allowances on sales to distributors   281,885     291,732     205,674  
Total current liabilities 489,961 476,175 386,022
Income taxes payable, non-current 210,967 205,384 173,880
Long-term credit facility 500,000 500,000 500,000
Other non-current liabilities 6,967 6,833 20,128
Stockholders' equity   1,085,336     958,577     799,877  
$ 2,293,231   $ 2,146,969   $ 1,879,907  
 
 
Key Ratios & Information
 
Current Ratio 4:1 4:1 4:1
Liabilities/Equity 1:1 1:1 1:1
Quarterly Operating Cash Flows $ 176,352 $ 105,484 $ 107,830
TTM Return on Equity 27 % 26 % 45 %
Quarterly Depreciation Expense $ 6,839 $ 7,361 $ 7,625
Quarterly Capital Expenditures $ 1,824 $ 2,384 $ 11,354
Annualized Net Sales per Employee $ 450 $ 412 $ 508
Number of Employees 2,551 2,581 2,760
Inventory MSOH (1): Altera 1.8 2.1 2.6
Inventory MSOH (1): Distribution 0.7 1.1 1.0
 
(1) MSOH: Months Supply On Hand
ALTERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  YEARS ENDED
December 31,   December 31,
  2009     2008  
Cash Flows from Operating Activities:
Net income $ 251,062 $ 359,651
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29,022 29,969
Stock-based compensation 64,446 48,630
Deferred income tax (benefit) expense (5,890 ) 737
Tax effect of employee stock plans (3,648 ) 1,311
Excess tax benefit from employee stock plans (990 ) (6,767 )
Gain on sale of land - (112 )
Gain on substantive termination of retiree medical plan (6,488 ) -
Changes in assets and liabilities:
Accounts receivable, net (136,115 ) 115,459
Inventories 14,931 (10,527 )
Other assets 38,862 (26,173 )
Accounts payable and other liabilities 7,918 2,810
Deferred income and allowances on sales to distributors 77,611 (74,766 )
Income taxes payable 39,860 9,717
Deferred compensation plan obligations   2,125     (673 )
Net cash provided by operating activities   372,706     449,266  
Cash Flows from Investing Activities:
Purchases of property and equipment (11,060 ) (40,273 )
Proceeds from the maturities and sales of available-for-sale investments - 131,060
Proceeds from sale of land - 9,063
(Purchases) sales of deferred compensation plan securities, net (2,125 ) 673
Purchases of intangible assets   (690 )   -  
Net cash (used in) provided by investing activities   (13,875 )   100,523  
Cash Flows from Financing Activities:
Proceeds from issuance of common stock through various stock plans 42,144 67,138
Shares withheld for employee taxes (10,738 ) (8,229 )
Repurchases of common stock - (473,229 )
Payment of dividends to stockholders (58,925 ) (57,051 )
Excess tax benefit from stock-based compensation 990 6,767
Decrease in book overdrafts - (320 )
Proceeds from long-term credit facility - 250,000
Principal payments on capital lease obligations   (2,373 )   (8,217 )
Net cash used for financing activities   (28,902 )   (223,141 )
Net increase in cash and cash equivalents 329,929 326,648
Cash and cash equivalents at beginning of period   1,216,743     890,095  
Cash and cash equivalents at end of period $ 1,546,672   $ 1,216,743  
ALTERA CORPORATION
NET SALES SUMMARY
(Unaudited)
               
THREE MONTHS ENDED Quarterly Growth Rate YEARS ENDED
Year- Annual
December 31, September 25, December 31, Sequential Over-Year December 31, December 31, Growth
2009   2009   2008   Change Change 2009   2008   Rate

Geography

North America 21 % 23 % 23 % 17 % 4 % 20 % 23 % -23 %
Asia Pacific 39 % 38 % 36 % 34 % 28 % 40 % 35 % 1 %
Europe 21 % 21 % 23 % 24 % 6 % 22 % 23 % -18 %
Japan 19 % 18 % 18 % 31 % 21 % 18 % 19 % -18 %
Total 100 % 100 % 100 % 27 % 16 % 100 % 100 % -13 %
 
 

Product Category

New 62 % 60 % 48 % 30 % 49 % 58 % 44 % 16 %
Mainstream 19 % 20 % 25 % 24 % -10 % 21 % 26 % -29 %
Mature & Other 19 % 20 % 27 % 22 % -18 % 21 % 30 % -40 %
Total 100 % 100 % 100 % 27 % 16 % 100 % 100 % -13 %
 
 

Market Segment

Telecom & Wireless 41 % 40 % 38 % 31 % 26 % 44 % 36 % 4 %
Industrial Automation, Military & Auto 23 % 23 % 25 % 23 % 7 % 22 % 24 % -18 %
Networking, Computer & Storage 14 % 16 % 14 % 14 % 13 % 14 % 16 % -20 %
Other 22 % 21 % 23 % 35 % 12 % 20 % 24 % -28 %
Total 100 % 100 % 100 % 27 % 16 % 100 % 100 % -13 %
 
 
 

FPGAs and CPLDs

FPGA 78 % 77 % 75 % 29 % 22 % 77 % 74 % -9 %
CPLD 15 % 15 % 16 % 22 % 1 % 15 % 18 % -27 %
Other 7 % 8 % 9 % 20 % -5 % 8 % 8 % -18 %
Total 100 % 100 % 100 % 27 % 16 % 100 % 100 % -13 %
 
 
 

Product Category Description

Category

Products

New

Stratix II (and GX), Stratix III, Stratix IV (including E, GX and GT), Arria GX, Arria II GX, Cyclone II, Cyclone III, MAX II, HardCopy, and Hardcopy II devices

Mainstream

Stratix (and GX), Cyclone, and MAX 3000A devices

Mature & Other

Classic™, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, FLEX® series, APEX™ series, Mercury™, Excalibur™, configuration and other devices, intellectual property cores, and software and other tools

Contacts

Altera Corporation
Scott Wylie, Vice President, 408-544-6996
Investor Relations
swylie@altera.com
Mark Plungy, Senior Manager, 408-544-6397
Public Relations
newsroom@altera.com

Altera Corporation