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Form 8-K ALTERA CORP For: Oct 22

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October 22, 2015 4:38 PM EDT



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K

            
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 22, 2015

            
ALTERA CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
0-16617
 
77-0016691
(State or Other Jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
101 Innovation Drive, San Jose, California
 
95134
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (408) 544-7000

Not Applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))













Item 2.02. Results of Operations and Financial Condition.
On October 22, 2015, Altera Corporation (the "Company") issued a press release announcing its financial results for the third quarter of 2015. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 8.01. Other Events.
On October 19, 2015, the Company's board of directors declared a quarterly cash dividend of $0.18 per common share. The quarterly dividend will be paid on December 1, 2015 to stockholders of record on November 10, 2015.

Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
 

99.1 Press release dated October 22, 2015





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ALTERA CORPORATION
 
/s/ RONALD J. PASEK

Ronald J. Pasek
Senior Vice President, Finance and Chief Financial Officer
Dated: October 22, 2015




EXHIBIT INDEX 
 
Exhibit No.       Description 
99.1 
Press release dated October 22, 2015













INVESTOR CONTACT
 
MEDIA CONTACT
Scott Wylie - Vice President
 
Sue Martenson - Senior Manager
Investor Relations
 
Public Relations
(408) 544-6996
 
(408) 544-8158
 


ALTERA ANNOUNCES THIRD QUARTER RESULTS


San Jose, Calif., October 22, 2015 — Altera Corporation (NASDAQ: ALTR) today announced third quarter sales of $399.6 million, down 4 percent from the second quarter of 2015 and down 20 percent from the third quarter of 2014. Third quarter net income was $61.5 million, $0.20 per diluted share, compared with net income of $70.3 million, $0.23 per diluted share, in the second quarter of 2015 and $118.0 million, $0.38 per diluted share, in the third quarter of 2014.

Year-to-date cash flow from operating activities was $392.9 million. Altera's board of directors has declared a quarterly cash dividend of $0.18 per share, to be paid on December 1, 2015 to shareholders of record on November 10, 2015.

"Market conditions globally were quite varied this quarter as some vertical markets produced good growth while others were weak. In spite of these headwinds we saw double-digit new product growth plus continued strength in data center demand," said John Daane, president, chief executive officer, and chairman of the board.


 



1



Third Quarter Business Summary

The quarter's sequential sales decline reflects choppy conditions across the company's vertical markets. Telecom and Wireless sales grew as wireless equipment demand rebounded from the prior quarter. Industrial market weakness was the major contributor to a decline in sales in the Industrial Automation, Military & Auto vertical market. Networking, Computer & Storage sales grew, led by gains in computer and storage, as data center customers increasingly leverage the performance and low power benefits of Altera FPGAs. Gross margin was 66.5 percent, down from the second quarter, due to unfavorable changes in vertical market mix. Reduced merger-related expenses led to a sequential decline in the quarter's operating expenses. The company's tax rate was 21.4 percent, up from the prior quarter, largely the result of continuing adverse geographic mix and reduced acquisition-related costs in the quarter.




SELECTED THIRD QUARTER RATIOS AND RELATED RESULTS


($ in thousands) Key Ratios & Information
 
September 25, 2015
 
June 26, 2015
Current Ratio
 
4:1

 
5:1

Liabilities/Equity
 
3:4

 
3:4

Quarterly Operating Cash Flows
 
$
167,018

 
$
89,220

TTM Return on Equity
 
10
%
 
12
%
Quarterly Depreciation Expense
 
$
12,183

 
$
11,985

Quarterly Capital Expenditures
 
$
10,190

 
$
7,696

Inventory MSOH (1): Altera
 
3.6

 
4.2

Inventory MSOH (1): Distribution
 
0.8

 
0.7

Cash Conversion Cycle (Days)
 
168

 
162

Turns
 
48
%
 
46
%
Book to Bill
 
<1.0

 
<1.0

 
 
 
 
 
Note (1): MSOH: Months Supply On Hand
 
 
 
 












2



ALTERA CORPORATION
NET SALES SUMMARY
(Unaudited)

 
Three Months Ended
 
Quarterly Growth Rate
 
September 25,
2015
 
June 26,
2015
 
September 26,
2014
 
Sequential Change
 
Year-
Over-Year
Change
Geography
 
 
 
 
 
 
 
 
 
Americas
17
%
 
20
%
 
16
%
 
(14
)%
 
(15
)%
Asia Pacific
43
%
 
41
%
 
42
%
 
(1
)%
 
(19
)%
EMEA
29
%
 
27
%
 
29
%
 
4
 %
 
(19
)%
Japan
11
%
 
12
%
 
13
%
 
(13
)%
 
(33
)%
Net Sales
100
%
 
100
%
 
100
%
 
(4
)%
 
(20
)%
Product Category
 
 
 
 
 
 
 
 
 
New
62
%
 
53
%
 
56
%
 
12
 %
 
(12
)%
Mainstream
16
%
 
23
%
 
21
%
 
(31
)%
 
(37
)%
Mature and Other
22
%
 
24
%
 
23
%
 
(11
)%
 
(23
)%
Net Sales
100
%
 
100
%
 
100
%
 
(4
)%
 
(20
)%
Vertical Market
 
 
 
 
 
 
 
 
 
Telecom & Wireless
35
%
 
31
%
 
45
%
 
11
 %
 
(37
)%
Industrial Automation, Military & Automotive
24
%
 
27
%
 
21
%
 
(14
)%
 
(6
)%
Networking, Computer & Storage
21
%
 
18
%
 
16
%
 
11
 %
 
1
 %
Other
20
%
 
24
%
 
18
%
 
(20
)%
 
(12
)%
Net Sales
100
%
 
100
%
 
100
%
 
(4
)%
 
(20
)%
FPGAs and CPLDs
 
 
 
 
 
 
 
 
 
FPGA
84
%
 
83
%
 
85
%
 
(2
)%
 
(21
)%
CPLD
9
%
 
11
%
 
8
%
 
(20
)%
 
(5
)%
Other Products
7
%
 
6
%
 
7
%
 
7
 %
 
(22
)%
Net Sales
100
%
 
100
%
 
100
%
 
(4
)%
 
(20
)%

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.


3



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 data center application growth potential. 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, changing global 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.





 
###

4


ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share amounts)
 
September 25,
2015
 
June 26,
2015
 
September 26,
2014
 
September 25,
2015
 
September 26,
2014
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
399,567

 
$
414,162

 
$
499,606

 
$
1,249,214

 
$
1,452,216

Cost of sales
 
133,667

 
126,590

 
166,019

 
416,520

 
480,279

Gross margin
 
265,900

 
287,572

 
333,587

 
832,694

 
971,937

Operating expense
 
 
 
 
 
 
 
 
 
 
Research and development expense
 
100,481

 
105,345

 
112,078

 
309,057

 
310,856

Selling, general, and administrative expense
 
74,745

 
75,011

 
77,724

 
220,262

 
231,205

Amortization of acquisition-related intangible assets
 
2,491

 
2,427

 
2,465

 
7,382

 
7,394

Merger expenses
 
10,421

 
18,458

 
—

 
28,879

 
—

Total operating expense
 
188,138

 
201,241

 
192,267

 
565,580

 
549,455

Operating margin (2)
 
77,762

 
86,331

 
141,320

 
267,114

 
422,482

Compensation (benefit)/expense — deferred compensation plan
 
(4,468
)
 
2,732

 
(487
)
 
(1,709
)
 
4,093

Loss/(gain) on deferred compensation plan securities
 
4,468

 
(2,732
)
 
487

 
1,709

 
(4,093
)
Interest income and other
 
(9,590
)
 
(8,495
)
 
(4,558
)
 
(24,681
)
 
(18,362
)
Gain reclassified from other comprehensive income
 
(1,644
)
 
(1,463
)
 
(59
)
 
(5,613
)
 
(150
)
Interest expense
 
10,772

 
10,859

 
10,774

 
32,039

 
32,139

Income before income taxes
 
78,224

 
85,430

 
135,163

 
265,369

 
408,855

Income tax expense
 
16,706

 
15,091

 
17,154

 
38,660

 
47,328

Net income
 
61,518

 
70,339

 
118,009

 
226,709

 
361,527

 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income/(loss):
 
 
 
 
 
 
 
 
 
 
Unrealized gain/(loss) on investments:
 
 
 
 
 
 
 
 
 
 
Unrealized holding gain/(loss) on investments arising during period, net of tax of $190, ($460), ($6), ($228) and $41
 
13,058

 
(24,805
)
 
(4,929
)
 
5,038

 
22,102

Less: Reclassification adjustments for gain on investments included in net income, net of tax of ($1), $9, $11, $15 and $21
 
(1,644
)
 
(1,454
)
 
(48
)
 
(5,598
)
 
(129
)
Other comprehensive income/(loss)
 
11,414

 
(26,259
)
 
(4,977
)
 
(560
)
 
21,973

Comprehensive income
 
$
72,932

 
$
44,080

 
$
113,032

 
$
226,149

 
$
383,500

 
 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.20

 
$
0.23

 
$
0.38

 
$
0.75

 
$
1.16

Diluted
 
$
0.20

 
$
0.23

 
$
0.38

 
$
0.74

 
$
1.15

 
 
 
 
 
 
 
 
 
 
 
Shares used in computing per share amounts:
 
 

 
 
 
 

 
 
 
 
Basic
 
302,707

 
301,799

 
308,215

 
301,950

 
311,853

Diluted
 
305,337

 
304,604

 
310,184

 
304,421

 
314,130

 
 
 
 
 
 
 
 
 
 
 
Dividends per common share
 
$
0.18

 
$
0.18

 
$
0.18

 
$
0.54

 
$
0.48

 
 
 
 
 
 
 
 
 
 
 
Tax rate
 
21.4
%
 
17.7
%
 
12.7
%
 
14.6
%
 
11.6
%
% of Net sales:
 
 
 
 
 
 
 
 
 
 
Gross margin
 
66.5
%
 
69.4
%
 
66.8
%
 
66.7
%
 
66.9
%
Research and development (1)
 
25.8
%
 
26.0
%
 
22.9
%
 
25.3
%
 
21.9
%
Selling, general, and administrative
 
18.7
%
 
18.1
%
 
15.6
%
 
17.6
%
 
15.9
%
Operating margin(2)
 
19.5
%
 
20.8
%
 
28.3
%
 
21.4
%
 
29.1
%
Net income
 
15.4
%
 
17.0
%
 
23.6
%
 
18.1
%
 
24.9
%


5


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
 
Nine Months Ended
(In thousands, except per share amounts)
 
September 25,
2015
 
June 26,
2015
 
September 26,
2014
 
September 25,
2015
 
September 26,
2014
Operating margin (non-GAAP)
 
$
77,762

 
$
86,331

 
$
141,320

 
$
267,114

 
$
422,482

Compensation (benefit)/ expense — deferred compensation plan
 
(4,468
)
 
2,732

 
(487
)
 
(1,709
)
 
4,093

Income from operations (GAAP)
 
$
82,230

 
$
83,599

 
$
141,807

 
$
268,823

 
$
418,389



6


ALTERA CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except par value amount)
 
September 25,
2015
 
December 31,
2014
 
 
 
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
1,934,850

 
$
2,426,367

Short-term investments
 
185,762

 
151,519

Total cash, cash equivalents, and short-term investments
 
2,120,612

 
2,577,886

Accounts receivable, net
 
444,107

 
377,964

Inventories
 
159,310

 
153,387

Deferred income taxes — current
 
60,210

 
56,048

Deferred compensation plan — marketable securities
 
57,781

 
69,367

Deferred compensation plan — restricted cash equivalents
 
17,166

 
14,412

Other current assets
 
50,718

 
39,479

Total current assets
 
2,909,904

 
3,288,543

Property and equipment, net
 
208,897

 
194,840

Long-term investments
 
2,504,693

 
1,942,343

Deferred income taxes — non-current
 
20,725

 
20,077

Goodwill
 
81,331

 
74,341

Acquisition-related intangible assets, net
 
66,989

 
72,291

Other assets, net
 
92,646

 
81,791

Total assets
 
$
5,885,185

 
$
5,674,226

 
 
 
 
 
Liabilities and stockholders' equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
41,520

 
$
49,140

Accrued liabilities
 
47,523

 
28,384

Accrued compensation and related liabilities
 
74,113

 
69,837

Deferred compensation plan obligations
 
74,947

 
83,779

Deferred income and allowances on sales to distributors
 
439,504

 
344,168

Total current liabilities
 
677,607

 
575,308

Income taxes payable — non-current
 
352,433

 
313,447

Long-term debt
 
1,493,729

 
1,492,759

Other non-current liabilities
 
8,955

 
6,886

Total liabilities
 
2,532,724

 
2,388,400

Stockholders' equity:
 
 
 
 
Common stock: $.001 par value; 1,000,000 shares authorized; outstanding - 302,857 shares at September 25, 2015 and 302,430 shares at December 31, 2014
 
303

 
302

Capital in excess of par value
 
1,227,586

 
1,165,259

Retained earnings
 
2,115,487

 
2,110,620

Accumulated other comprehensive income
 
9,085

 
9,645

Total stockholders' equity
 
3,352,461

 
3,285,826

Total liabilities and stockholders' equity
 
$
5,885,185

 
$
5,674,226

 
 
 
 
 

7


ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
 
Nine Months Ended
 (In thousands)
 
September 25,
2015
 
September 26,
2014
 
 
 
 
 
Cash Flows from Operating Activities:
 
 
 
 
Net income
 
$
226,709

 
$
361,527

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
42,804

 
42,426

Amortization of acquisition-related intangible assets
 
7,382

 
7,394

Amortization of debt discount and debt issuance costs
 
2,337

 
2,337

Stock-based compensation
 
63,560

 
70,518

Net gain on sale of available-for-sale securities
 
(5,613
)
 
(150
)
Amortization of investment discount/premium
 
9,025

 
1,900

Deferred income tax expense
 
1,065

 
3,582

Tax effect of employee stock plans
 
3,352

 
7,434

Excess tax benefit from employee stock plans
 
(3,704
)
 
(4,719
)
Changes in assets and liabilities, net of the effects of acquisition:
 
 
 
 
Accounts receivable, net
 
(66,143
)
 
76,324

Inventories
 
(5,923
)
 
(22,458
)
Other assets
 
(5,796
)
 
(3,002
)
Accounts payable and other liabilities
 
9,401

 
32,581

Deferred income and allowances on sales to distributors
 
95,336

 
(90,744
)
Income taxes payable and receivable, net
 
26,202

 
36,345

Deferred compensation plan obligations
 
(7,123
)
 
(5,858
)
Net cash provided by operating activities
 
392,871

 
515,437

Cash Flows from Investing Activities:
 
 
 
 
Purchases of property and equipment
 
(52,243
)
 
(34,946
)
Sales of deferred compensation plan securities, net
 
7,123

 
5,858

Purchases of available-for-sale securities
 
(1,520,789
)
 
(276,867
)
Proceeds from sale of available-for-sale securities
 
804,163

 
79,424

Proceeds from maturity of available-for-sale securities
 
111,439

 
175,280

Acquisition, net of cash acquired
 
(4,000
)
 
—

Purchases of intangible assets
 
(5,359
)
 
(1,269
)
Purchases of other investments
 
(2,000
)
 
(8,224
)
Net cash used in investing activities
 
(661,666
)
 
(60,744
)
Cash Flows from Financing Activities:
 
 

 
 

Proceeds from issuance of common stock through stock plans
 
19,080

 
29,871

Shares withheld for employee taxes
 
(25,052
)
 
(20,852
)
Payment of dividends to stockholders
 
(162,947
)
 
(149,844
)
Holdback payment for prior acquisition
 
—

 
(3,353
)
Long-term debt and credit facility issuance costs
 
—

 
(1,321
)
Repurchases of common stock
 
(57,507
)
 
(502,986
)
Excess tax benefit from employee stock plans
 
3,704

 
4,719

Net cash used in financing activities
 
(222,722
)
 
(643,766
)
Net decrease in cash and cash equivalents
 
(491,517
)
 
(189,073
)
Cash and cash equivalents at beginning of period
 
2,426,367

 
2,869,158

Cash and cash equivalents at end of period
 
$
1,934,850

 
$
2,680,085


8

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