Altera Announces Second Quarter Results
Monday July 25, 4:15 pm ET
Sales Up 8% Sequentially
New Products Grow 25%
SAN JOSE, Calif.--(BUSINESS WIRE)--July 25, 2005--Altera Corporation (Nasdaq:ALTR - News) today announced second quarter 2005 sales of $285.5 million, up 8% from the first quarter of 2005 and up 6% from the second quarter of 2004. Sales of the company's new products grew 25% sequentially and were up 70% from the prior year's second quarter.
Second quarter net income was $67.6 million, $0.18 per diluted share, compared to net income of $75.3 million, $0.20 per diluted share, in the second quarter of 2004. Gross profit margin was 68.3% for the second quarter of 2005 versus 69.9% for the second quarter of 2004.
The second quarter tax provision includes a $21 million charge related to the planned repatriation of $400 million in foreign earnings pursuant to the provisions of the American Jobs Creation Act of 2004. In addition, the company recorded a tax benefit of approximately $15.2 million arising primarily from the settlement of Federal and California income tax audits during the quarter. The net impact of these two items added $5.8 million to the company's second quarter tax provision, reducing earnings per share by $0.01.
Altera repurchased 1.9 million shares of its common stock during the quarter at a cost of $38.0 million. Altera ended the quarter with $1.3 billion in cash and short- and long-term investments.
"Our new product growth rate accelerated from the first quarter's pace. Stratix® II FPGA sales doubled from the first quarter, and we continue to lead the 90-nm high-density FPGA market by a wide margin. While still very early in their life cycle, Cyclone(TM) II FPGA and MAX® II CPLD sales more than tripled, demonstrating the revenue growth potential represented by these new families. This was also another great quarter for HardCopy® structured ASIC sales, with results up sharply from the first quarter," said John Daane, president, chief executive officer, and chairman of the board. "Our two largest selling product families, Cyclone and Stratix FPGAs, also posted solid gains in the quarter. They remain the leading products of their generation in the PLD industry."
Altera's innovation and execution made the company the fastest-growing programmable logic supplier in 2004. This track record of innovation and execution continues in 2005:
-- As yet another indicator of the increasing use of programmable
solutions in the consumer market, Texas Instruments (TI) is
now using multiple Altera devices in its Digital Light
Processing (DLP) technology. TI provides its DLP components to
television manufacturers, enabling them to bring the highest
quality visual experience to consumers. TI initially chose
Cyclone FPGAs for its 720p DLP product. Cyclone devices met
TI's performance goals with the lowest-speed-grade device,
resulting in the maximum cost/performance benefit. Cyclone
devices were also readily available in high-volume quantities,
a critical requirement to support the steep production ramps
encountered in the consumer market. Building on the
contribution made by Cyclone FPGAs, TI next adopted Stratix
devices and HardCopy structured ASICs for its even higher
resolution 1080p DLP product. By incorporating the
high-performance digital signal processing (DSP) capabilities
of Altera's devices, which bolster TI's advanced video
processing, TI was able to bring its industry-leading
innovations to market, advancing its competitive position in
HDTV applications.
Because Altera is the only PLD vendor to offer a structured
ASIC solution, Altera is uniquely positioned to respond to
customers such as TI whose high-density FPGA-based designs
require lower costs for production. Being first-to-market is
critically important in fast-moving consumer electronics
equipment. Programmable logic's short design cycle offers
significant advantages to these customers. Altera's innovative
products, such as the low-cost Cyclone family, are
accelerating Altera's presence in consumer products and have
helped fuel the 22% compound growth Altera has experienced in
the consumer market from 1999 to 2004.
-- With the delivery of MAX II EPM1270 devices to the world's
largest television manufacturer, TTE Corporation, Altera has
now shipped more than 400 million MAX CPLDs. Altera has led
the CPLD market for more than 15 years, with cumulative MAX
sales of more than $4 billion, and is further strengthening
its leadership position with its new MAX II family. The MAX II
family is half the cost and consumes one-tenth the power of
previous MAX generations, while maintaining the same
non-volatile memory and ease-of-use characteristics of the
original MAX series. Due to its density and cost
characteristics, the MAX II family can be used to replace less
flexible and more expensive ASSPs, ASICs, and discrete
devices, expanding the market beyond traditional CPLD
applications.
Business Outlook for the Third Quarter
Note: The following management expectations for the third quarter are stated in approximate terms and assume no impact from the operation of the company's deferred compensation plan.
Altera expects that sales in the third quarter will be up 1% to 3% sequentially. Sales growth will be more moderate in comparison to the second quarter largely as a result of typical seasonal slowing in Europe.
Gross margins will be 68% to 69%, unchanged from the company's previous second half gross margin expectations.
Research and development spending will decrease to approximately $52 million, reflecting lower new product introduction costs in the quarter.
SG&A expenses will be in the range of $58 million.
Other income will be approximately $8 million.
The expected tax rate will be approximately 20%.
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 the third quarter 2005 outlook. The web cast and subsequent replay will be available in the investor relations section of the company's web site at 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 third quarter business update will be issued in a press release available after the market close on September 6.
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," "believe," "expects," or words that imply or predict a future state. 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, customer business environment, market acceptance of the company's products, the rate of growth of the company's new products including the Stratix, Stratix II, Cyclone, Cyclone II, MAX II, and HardCopy II device families, the rate at which our customers' new platforms enter production, as well as changing economic conditions, and other risk factors discussed in documents filed by the company with the Securities and Exchange Commission from time to time. Copies of Altera's SEC filings are posted on the company's web site 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 Corporation (Nasdaq:ALTR - News) is the world's pioneer of system-on-a-programmable-chip (SOPC) solutions. Combining programmable logic technology with software tools, intellectual property, and technical services, Altera provides high-value programmable solutions to approximately 14,000 customers worldwide. More information is available at altera.com.
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 and note)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -------------------
Jul. 1 Apr. 1 Jul. 2 Jul. 1 Jul. 2
2005 2005 2004 2005 2004
--------- --------- --------- --------- ---------
Net sales $285,477 $264,822 $268,972 $550,299 $511,880
Cost of sales 90,592 83,890 81,026 174,482 156,867
--------- --------- --------- --------- ---------
Gross margin 194,885 180,932 187,946 375,817 355,013
--------- --------- --------- --------- ---------
Operating expenses:
Research and
development 55,340 51,389 42,738 106,729 85,320
Selling, general,
and
administrative 55,895 54,334 52,712 110,229 102,590
--------- --------- --------- --------- ---------
Total operating
expenses 111,235 105,723 95,450 216,958 187,910
--------- --------- --------- --------- ---------
Income from
operations 83,650 75,209 92,496 158,859 167,103
Interest and other
income, net 8,058 4,498 3,272 12,556 7,008
--------- --------- --------- --------- ---------
Income before income
taxes 91,708 79,707 95,768 171,415 174,111
Provision for income
taxes (24,142) (15,941) (20,459) (40,083) (40,045)
--------- --------- --------- --------- ---------
Net income $ 67,566 $ 63,766 $ 75,309 $131,332 $134,066
========= ========= ========= ========= =========
Income per share:
Basic $ 0.18 $ 0.17 $ 0.20 $ 0.35 $ 0.36
========= ========= ========= ========= =========
Diluted $ 0.18 $ 0.17 $ 0.20 $ 0.35 $ 0.35
========= ========= ========= ========= =========
Shares used in
computation:
Basic 373,040 372,881 373,696 372,961 374,723
========= ========= ========= ========= =========
Diluted 379,585 379,443 382,819 379,514 384,314
========= ========= ========= ========= =========
Tax rate 26.3% 20.0% 21.4% 23.4% 23.0%
% of Net sales:
Gross margin 68.3% 68.3% 69.9% 68.3% 69.4%
Research and
development 19.4% 19.4% 15.9% 19.4% 16.7%
Selling, general,
and administrative 19.6% 20.5% 19.6% 20.0% 20.1%
Income from
operations 29.3% 28.4% 34.4% 28.9% 32.6%
Net income 23.7% 24.1% 28.0% 23.9% 26.2%
Note: Our Nonqualified Deferred Compensation Plan (NQDC Plan) had a
gain of $0.7 million and a loss of $1.2 million, respectively, for the
three month periods ended July 1, 2005 and April 1, 2005. Gains or
(losses) were included in interest and other income, as well as
compensation expense as follows. There was no net impact on income
before income taxes or net income for any period presented.
Q-Q
NQDC Impact (In Millions) Q2'05 Q1'05 Change
----------- ------- ------- -------
Increase/(Decrease) in R&D Expense $ 0.4 $ (0.4) $ 0.8
Increase/(Decrease) in SG&A Expense 0.3 (0.8) 1.1
------- ------- -------
Increase/(Decrease) in Interest and
other income $ 0.7 $ (1.2) $ 1.9
======= ======= =======
ALTERA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
Jul. 1 Apr. 1 Dec. 31
2005 2005 2004
----------- ----------- -----------
Assets
Current assets:
Cash and short-term investments $1,203,033 $1,209,470 $1,203,248
Accounts receivable, net 146,252 113,832 67,522
Inventories 63,588 55,604 67,454
Deferred compensation plan assets 57,134 58,965 56,148
Other current assets 148,094 132,401 142,725
----------- ----------- -----------
Total current assets 1,618,101 1,570,272 1,537,097
Long-term investments 72,301 - -
Property and equipment, net 156,937 158,145 159,587
Deferred income taxes and other
assets, net 47,321 49,391 49,982
----------- ----------- -----------
$1,894,660 $1,777,808 $1,746,666
=========== =========== ===========
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable and current
liabilities $ 200,735 $ 183,798 $ 190,813
Deferred compensation plan
obligations 57,134 58,965 56,148
Deferred income and allowances on
sales to distributors 255,554 225,186 221,081
----------- ----------- -----------
Total current liabilities 513,423 467,949 468,042
Stockholders' equity 1,381,237 1,309,859 1,278,624
----------- ----------- -----------
$1,894,660 $1,777,808 $1,746,666
=========== =========== ===========
Key Ratios & Information
Current Assets/Current Liabilities 3:1 3:1 3:1
Liabilities/Equity 1:3 1:3 1:3
Annualized YTD Return on Equity 20% 20% 24%
Quarterly Depreciation Expense $6,480 $6,982 $6,245
Quarterly Capital Expenditures $5,272 $5,540 $8,862
Annualized Sales per Employee $499 $486 $489
Number of Employees 2,259 2,197 2,164
Inventory MSOH(a): Altera 2.1 2.0 2.8
Inventory MSOH(a): Distribution 1.3 1.3 1.4
Days Sales Outstanding 47 39 26
(a)MSOH: Months Supply On Hand
Note: Certain reclassifications have been made to prior period
balances in order to conform to the current period's presentation.
ALTERA CORPORATION
REVENUE SUMMARY
(Unaudited)
Q-Q Y-Y
Q2'05 Q1'05 Q2'04 Growth Growth
------ ------ ------ ------ ------
Geography
---------
North America 24% 24% 27% 4% -9%
------ ------ ------
Europe 25% 27% 24% 0% 10%
Japan 25% 25% 26% 9% 6%
Asia Pacific 26% 24% 23% 20% 19%
------ ------ ------
International 76% 76% 73% 9% 12%
------ ------ ------
Total 100% 100% 100% 8% 6%
====== ====== ======
Product Category
----------------
New 40% 34% 25% 25% 70%
Mainstream 36% 39% 43% 0% -13%
Mature & Other 24% 27% 32% -3% -18%
------ ------ ------
Total 100% 100% 100% 8% 6%
====== ====== ======
Market Segment
--------------
Communications 43% 41% 41% 12% 10%
Industrial 31% 31% 34% 9% -2%
Computer & Storage 10% 11% 11% -1% 1%
Consumer 16% 17% 14% 2% 20%
------ ------ ------
Total 100% 100% 100% 8% 6%
====== ====== ======
FPGAs and CPLDs
---------------
FPGA 69% 69% 69% 9% 7%
CPLD 20% 21% 23% 2% -9%
Other 11% 10% 8% 14% 40%
------ ------ ------
Total 100% 100% 100% 8% 6%
====== ====== ======
Product Category Description
----------------------------
Category Products
-------- --------
New Stratix, Stratix II, Stratix GX, Cyclone,
Cyclone II, MAX 3000A, MAX II, and
HardCopy devices
Mainstream APEX 20K, APEX 20KC, APEX 20KE, APEX II,
FLEX 10KE, ACEX 1K, Excalibur, Mercury,
MAX 7000A, and MAX 7000B devices
Mature & Other FLEX 6000, FLEX 8000, FLEX 10K, FLEX
10KA, MAX 7000, MAX 7000S, MAX 9000,
Classic, configuration and other
devices, software and other tools, and
intellectual property cores
Note: During the quarter ended July 1, 2005, we refined our
methodology for classifying revenue by market segment. All prior
period data have been adjusted to conform to the current period's
methodology. Data calculated under both the new and former
methodologies are available in the investor relations section of the
company's website at altera.com.
--------------------------------------------------------------------------------
Source: Altera Corporation |
