<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-16617
ALTERA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0016691
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
101 INNOVATION DRIVE, SAN JOSE, CALIFORNIA 95134
(Address of Principal Executive Offices, including Zip Code)
(408) 544-7000
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. ____
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $14,554,443,000 as of March
1, 2000, based upon the closing sale price on the Nasdaq National Market for
that date.
There were 199,520,091 shares of the registrant's Common Stock issued
and outstanding as of March 1, 2000.
<PAGE> 2
This Report on Form 10-K/A (Amendment No. 1) is being filed for the sole
purpose of adding an exhibit to the Report on Form 10-K filed by the registrant
on March 24, 2000.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 10-K
(a) The following document is filed as part of this Amendment No. 1:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
#13.1(a) Annual Report to Stockholders for the fiscal year ended
December 31, 1999 (to be deemed filed only to the extent
required by the instructions to Exhibits for Reports on Form
10-K).
</TABLE>
- -------------------
(a) Filed herewith.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf, by the undersigned thereto duly authorized.
ALTERA CORPORATION
By: /s/ Nathan Sarkisian
------------------------------------
Nathan Sarkisian
Senior Vice President and
Chief Financial Officer
March 29, 2000
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
#13.1(a) Annual Report to Stockholders for the fiscal year ended
December 31, 1999 (to be deemed filed only to the extent
required by the instructions to Exhibits for Reports on Form
10-K).
</TABLE>
- -------------------
(a) Filed herewith.
<PAGE> 1
EXHIBIT #13.1
ALTERA CORPORATION
1999 ANNUAL REPORT
<PAGE> 2
LETTER TO SHAREHOLDERS
I am pleased to again report record revenues and income for the year. Our
revenues increased 28% to $837 million. Income from continuing operations was
$218 million, and expressed as a percent of revenue, increased 2.4 points to
26.0%. Growth, which accelerated in the second half of the year, was aided by
conditions in our end markets as the entire semiconductor industry pulled out of
a three-year slump in 1999. Our market strength in Japan and Asia-Pacific was an
important source of growth as those markets recovered dramatically in 1999. For
the year, our revenues in Japan increased 34% to $159 million, and our
Asia-Pacific revenues increased 76% to $49 million. North America, which is our
largest market, grew 31% to $469 million, and Europe grew a more moderate 7% to
$160 million.
More salient than the regional comparisons, however, is the strength of our new
products and the growth we experienced in the communications market sector. Our
new products, consisting of our 2.5- and 3.3-volt offerings, grew 222% for the
year, contributing a total of $175 million in incremental revenues or 96% of our
total revenue growth. These sales were driven by new design wins, not just
recovering markets. New product sales growth, more than any other factor, was
the reason for our growth in 1999 and indicates that our product development
efforts over the last several years have been well targeted. The communications
segment has been an increasing portion of our revenue base, and last year that
trend continued. Our sales into the communications segment grew 33%, and for the
year comprised 66% of our total sales. In the December quarter, the
communications sector accounted for 70% of our sales. New products are being
used by the telecommunications, networking, and wireless industries to
facilitate the rapid growth in infrastructure caused by the communications
revolution.
Sales growth translated into exceptional performance on the bottom line. Gross
margins were an all-time record at 64.0% of revenue, up from the 61.9% reported
in 1998. Selling, general, and administrative expenses declined as a percent of
revenue, and we benefited from higher interest rates. Operating income increased
to 36.6% of revenue. Net margins expanded through the year and in the December
quarter were 27.0% (excluding non-recurring items). While improving our margins,
we also increased our investment in research and development by 44% to $86
million--$26 million more than we spent in 1998. While much of our increased
effort is embodied in products still in the development pipeline, we had a
banner year in new product introductions. We began to roll out the APEX(TM) 20KE
family and completed the introductions of the FLEX(R) 10KE, MAX(R) 7000A, MAX
3000A, and APEX 20K families. We introduced our Quartus(TM) software to the
marketplace, and we deployed several new proprietary packaging technologies,
including the FineLine BGA(TM) (ball-grid array) and flip-chip packages.
New products drove our revenue growth and are our primary assets in the
competitive situation. As I mentioned last year, the programmable logic
marketplace consists of two distinct segments: "product-term" architectures,
including our Classic(TM) and MAX families, and "look-up table" architectures,
including our FLEX and APEX families.
<PAGE> 3
Product-term architectures, which offer lower densities and are growing more
slowly, comprised 47% of our revenue, and we maintained market share at an
estimated 40%. Until the Lattice acquisition of AMD's programmable logic
subsidiary Vantis, Altera had been the market-share leader in this segment. Our
goal is to increase our market share and regain the number one position in this
segment. In 1999, we refocused our efforts in this area; as previously
mentioned, we introduced the MAX 7000A and MAX 3000A architectures, and began
development of the MAX 7000B family at 2.5 volts.
In the look-up table segment, which offers higher densities and faster growth,
we captured market share, increasing to an estimated 31% in 1999 from 28% in
1998. Total look-up table revenues increased 60%, and at year-end exceeded our
product-term revenues for the first time. Our new product offerings in this
area--the APEX 20K, APEX 20KE, FLEX 10KA, FLEX 10KE, and FLEX 6000
families--grew 187% on a combined basis.
We started the year behind the competition on the ultra-high density front,
introducing the APEX architecture relatively late to the marketplace and
delivering a tool set that was not robust. We have made good progress this year
in addressing these issues. We completed the introduction of the 2.5-volt APEX
20K family, and the 1.8-volt APEX 20KE architecture was introduced at the end of
the year with initial shipments of the APEX EP20K400E. We believe this family,
which will roll out over the first half of 2000, has the feature set and
performance to recapture our customers' mind-share and reestablish Altera as the
high-density leader. Moreover, our Quartus software has been the subject of
continuous engineering and refinement; two major releases shipped in 1999 and
another in the first quarter of 2000. I am confident that the APEX/Quartus
combination will put us in a position to again become the fastest growing
programmable logic supplier.
As I stated earlier, growth in the communications industry drove Altera's growth
in 1999, and the communications industry will drive our growth for the
foreseeable future. Several major forces are shaping the communications
equipment industry today. First, data traffic is increasing geometrically,
driven by the explosive growth of the Internet. Secondly, the mobile
communications infrastructure is expanding to support the increased demand for
multifunction, low-cost, hand-held devices. Finally, the entertainment
industry's drive to provide consumers with customized and tailored programming
is pushing the limits of the communications infrastructure. In all cases, our
customers are challenged to move more information faster through the
communications medium, including traditional copper wires, fiber optic cable,
and wireless systems. The need for more bandwidth will rise as fast as
industry's ability to supply it, and there will be a large premium for the
vendor who can supply it first.
Our challenge and our opportunity lies in our ability to help our customers
build increasingly complex and higher performance systems, and to help them get
their product to the marketplace first. Our response to that challenge, and our
strategy, is a concept we call "system on a programmable chip" or "SOPC."
Increased integration, i.e., more functionality on a single piece of silicon,
enables faster end-system performance, and our
<PAGE> 4
customers are leveraging advances in semiconductor processing technology to
integrate more and more functions on a single chip. Historically, the highest
levels of integration have been achieved by using "standard cell" devices.
Standard cells are designed using a "library" of pre-existing functions (often
called "cores" or silicon intellectual property) that can be "stitched" together
to form a unique device tailored to the end customer's objective. Standard
cells, then, are custom devices, built using customized tooling through the
fabrication process.
We believe that the standard cell methodology has inherent limitations compared
to programmable devices. Unique tooling in the batch-oriented wafer fabrication
process leads to manufacturing (cost) inefficiencies for all but the highest
volume standard-cell applications. Further, the long lead-time from design to
prototype and verification (compared to programmable devices) inserts
unnecessary delay in the design cycle. Finally, the costs of repairing
undetected design errors in standard cells are enormous--scrapped tooling and
additional delays. Despite these drawbacks, designers have preferred standard
cells for many applications because historically, they provided higher levels of
integration and performance, and integrated more effectively into the design
flows used by system-level designers. Further, standard cell vendors were early
developers of reusable functions, or cores.
SOPC changes all of that. We have the design methodology, the library of
functions, and the silicon that not only makes programmable systems residing on
a single piece of silicon technically possible, but a practical reality. The
Quartus software links seamlessly with major EDA design platforms and contains
unique features designed to simplify and facilitate large-scale designs.
Complimenting this methodology is a growing library of 145 standard functions
that can be downloaded at no cost from the web, parameterized by the user to
meet their exact requirements, and implemented on our silicon on a trial basis.
With this technology, our customers can combine microprocessors, memory, and
many other standardized functions as well as their own proprietary intellectual
property into a design. Finally, our APEX 20KE family, with up to 1.5 million
usable gates (2.5 million maximum system gates), has the density to accommodate
system-level designs and the performance to meet today's demanding
specifications. The combination of design software that fits into the customer's
existing design flow, parameterized cores, and programmable silicon as the test
and delivery vehicle constitutes our definition of SOPC, and is our vision for
our future.
Today, we can provide the functionality and integration of typical standard cell
designs with an added benefit: programmability. Programmability has always
shortened design cycles by reducing the time from design to working silicon.
Going forward, this advantage is amplified by hardware/software co-design. In
the realm of system on a chip, designers are faced with the complexity of
simultaneously designing their system software and hardware. Programmable logic
facilitates this process through an iterative design methodology and flexible
partitioning between the hardware and software. System on a programmable chip is
an integrated approach to system design that accelerates time-to-market, a
proposition with ever-increasing value.
<PAGE> 5
Our business began, seventeen years ago, selling programmable logic components
that helped customers integrate small-scale standard logic devices and get to
market quickly with lower design cost and more flexible inventory. Our business
is evolving towards the selling of a solution that is indeed a complete system.
Going forward, we will augment our knowledge of programmable silicon and design
tools with end-applications expertise. Our acquisitions of Boulder Creek
Engineering and Hammercores are the most visible signs to date of our
determination to acquire systems expertise. We have also begun to realign our
structure to facilitate the accumulation and development of systems expertise
within the organization. We will leverage this expertise to help customers
develop leading-edge systems and to focus our product development efforts. SOPC
marks the beginning of a new era in system design and also a new period in
Altera's evolution.
At the end of 1999, I announced my intention to retire from my position as CEO
of Altera, while remaining as Chairman of the Board. As of this writing, the
search for my successor is underway. I remain confident that the vision we have
in place will endure and that our management team and employees have the
leadership and skills to execute our goals. The foundational technologies we
have in place and the steps that we have taken will continue to push Altera
toward the goal of becoming the #1 ASIC supplier.
Thank you for your continued support.
Rodney Smith
Chairman, Chief Executive Officer, and President
<PAGE> 6
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Five-Year Summary
Year ended December 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Sales $ 836,623 $ 654,342 $ 631,114 $ 497,306 $ 401,598
Cost of sales 301,322 249,474 236,958 191,958 158,808
Gross margin 535,301 404,868 394,156 305,348 242,790
Research and development expenses 86,065 59,864 54,417 49,513 33,849
Selling, general, and administrative expenses 143,214 113,161 112,784 87,742 74,658
Income from operations $ 306,022 $ 231,843 $ 226,955 $ 168,093 $ 134,283
Income before income taxes, equity
investment and cumulative effect
of change in accounting principle $ 343,077 $ 244,183 $ 229,571 $ 169,137 $ 137,891
Income before equity investment and
cumulative effect of change in
accounting principle $ 231,578 $ 164,827 $ 151,517 $ 109,135 $ 86,871
Equity in loss of WaferTech, LLC 7,584 10,440 -- -- --
Income before cumulative effect of
change in accounting principle 223,994 154,387 151,517 109,135 86,871
Cumulative effect of change in
accounting principle -- -- 18,064 -- --
Net income $ 223,994 $ 154,387 $ 133,453 $ 109,135 $ 86,871
Income per share before cumulative
effect of change in accounting principle:
Basic $ 1.13 $ 0.83 $ 0.85 $ 0.62 $ 0.50
Diluted 1.08 0.78 0.77 0.58 0.48
Net income per share:
Basic $ 1.13 $ 0.83 $ 0.75 $ 0.62 $ 0.50
Diluted 1.08 0.78 0.68 0.58 0.48
Shares used in computing income per share:
Basic 198,079 186,986 177,050 174,812 173,250
Diluted 207,464 203,178 205,232 201,626 191,862
Balance Sheet Data:
Working capital $ 785,359 $ 587,923 $ 430,371 $ 295,020 $ 346,242
Total assets 1,439,599 1,093,331 952,518 778,212 715,554
Long-term debt -- -- 230,000 230,000 288,600
Stockholders' equity 1,118,073 881,721 536,687 370,245 255,189
Book value per share 5.63 4.52 3.01 2.11 1.46
</TABLE>
<PAGE> 7
ABOUT YOUR INVESTMENT
Stock Ownership Profile
The Company estimates that at December 31, 1999 there were more than 45,000
holders of Altera Stock.
Stock Price
Altera's initial public offering took place on March 31, 1988. The Company's
price-to-earnings ratio at each year-end for the last five years was as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
26.2 29.6 21.4 39.0 45.9
</TABLE>
Computed using earnings that exclude the cumulative effect of change in
accounting principle in 1997.
Trading Volume
The average trading volume in the Company's stock decreased 15% in 1999 over
1998, as measured by Nasdaq(R). Trading volume in 1999 averaged 4.4 million
shares per day, compared to 5.1 million shares per day in 1998 and 5.6 million
in 1997, retroactively adjusted for 2-for-1 splits of the Company's common stock
in the second quarter of 1995, the fourth quarter of 1996, and the second
quarter of 1999.
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL DATA
Research and Development
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
34 50 54 60 86
</TABLE>
Gross Margin
(percentage of sales)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
61 61 62 62 64
</TABLE>
S, G & A
(percentage of sales)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
19 18 18 17 17
</TABLE>
Income From Operations
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
134 168 227 232 306
</TABLE>
<PAGE> 9
Sales
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
402 497 631 654 837
</TABLE>
Sales Per Employee
(dollars in thousands)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
519 553 630 585 656
</TABLE>
Units Sold
(units in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
39 41 54 58 69
</TABLE>
Capital Expenditures
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
46 45 81 24 30
</TABLE>
1999 Revenue -- Geographic Channel
$836.6 Million
<TABLE>
<CAPTION>
North America Asia-Pacific Japan Europe
- ------------- ------------ ----- ------
<S> <C> <C> <C>
56% 6% 19% 19%
</TABLE>
<PAGE> 10
1999 Revenue -- Market Segment
$836.6 Million
<TABLE>
<CAPTION>
Communications EDP Consumer & Other Industrial
- -------------- --- ---------------- ----------
<S> <C> <C> <C>
66% 16% 7% 11%
</TABLE>
1999 CMOS PLD Market Share*
$2.6 Billion
<TABLE>
<CAPTION>
Xilinx Altera Actel Lucent Lattice Other
- ------ ------ ----- ------ ------- -----
<S> <C> <C> <C> <C> <C>
35% 32% 7% 5% 16% 5%
</TABLE>
*Company reports and Altera estimates
Total Assets
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
716 778 953 1,093 1440
</TABLE>
Working Capital
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
346 295 430 588 785
</TABLE>
<PAGE> 11
Book Value Per Share
(dollars)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.46 2.11 3.01 4.52 5.63
</TABLE>
Stockholders' Equity
(dollars in millions)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
255 370 537 882 1,118
</TABLE>
<PAGE> 12
CORPORATE DIRECTORY
Board of Directors
Rodney Smith
Chairman, President, and
Chief Executive Officer
Altera Corporation
Charles M. Clough
Former Chairman, President, and
Chief Executive Officer
Wyle Electronics
Michael A. Ellison
Chief Executive Officer
Steller, Inc.
Paul Newhagen
Former Vice President, Administration
Altera Corporation
Robert W. Reed
Former Senior Vice President
Intel Corporation
William E. Terry
Former Director and
Executive Vice President
Hewlett-Packard Company
Deborah Rieman, Ph.D.
Former President and
Chief Executive Officer
CheckPoint Software Technologies, Inc.
Corporate Officers
Rodney Smith
President and Chief Executive Officer
C. Wendell Bergere
Vice President, General Counsel,
and Secretary
Denis Berlan
Executive Vice President and
Chief Operating Officer
Erik R. Cleage
Senior Vice President, Marketing
John R. Fitzhenry
Vice President, Human Resources
Nathan Sarkisian
Senior Vice President and
Chief Financial Officer
Peter Smyth
Vice President, Sales
Appointed Officers
Bahram Ahanin
Vice President, CAD and
Design Automation
Melonie C. Brophy
Vice President, Finance,
and Treasurer
<PAGE> 13
Donald F. Faria
Vice President, Customer Marketing,
Applications and Product Planning
Frank L. Hannig
Vice President and
Chief Information Officer
William Y. Hata
Vice President, Product Engineering
Lance M. Lissner
Vice President, Business Development and Investor Relations
Bruce Mielke
Vice President, Test Development
Thomas B. Murchie
Vice President, Operations
Timothy J. Propeck
Vice President, North America Sales
Timothy J. Southgate
Vice President, Software Engineering
Clifton S. Tong
Vice President, Corporate Marketing
Nigel Toon
Vice President and
Managing Director--Europe
John E. Turner
Vice President, Design Engineering
Corporate Headquarters
101 Innovation Drive
San Jose, California 95134
(408) 544-7000
Independent Accountants
PricewaterhouseCoopers LLP
San Jose, California
<PAGE> 14
Stock Listing
Altera's common stock trades
on The Nasdaq Stock Market(R)
under the symbol ALTR.
For the past two years,
the quarterly high and low
closing sales prices for the
common stock were:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Quarter High Low High Low
- ------- ------ ------- ------ ------
<S> <C> <C> <C> <C>
First 34-1/2 24-5/16 22-1/8 14-3/8
Second 40-5/16 32-1/16 22-5/16 14-1/8
Third 55-1/4 35-1/8 21-1/2 14-1/2
Fourth 67-3/4 41-3/4 30-15/16 14-3/4
</TABLE>
Registrar/Transfer Agent
Fleet National Bank
c/o EquiServe
Investor Relations
P.O. Box 8040
Boston, MA 02266-8040
(781) 575-3120
http://www.EquiServe.com
Web Site
For current information on Altera Corporation,
visit our web site at
http://www.altera.com.
Additional Information
Please direct all requests to:
Investor Relations
101 Innovation Drive
San Jose, California 95134
(408) 544-7707
Earnings releases may be requested from Altera's Fax-on-Demand service at
(800) 789-2587 in the United States and Canada and at (408) 894-0466 from other
international locations.
<PAGE> 15
Copyright (C) 2000 Altera Corporation. Altera, The Programmable Solutions
Company, APEX, APEX 20K, APEX 20KE, FLEX, FLEX 10K, FLEX 10KA, FLEX 10KE, FLEX
8000, FLEX 6000, FLEX 6000A, MAX, MAX 9000, MAX 9000A, MAX 7000, MAX 7000S, MAX
7000A, MAX 7000B, MAX 5000, MAX 3000, MAX 3000A, AMPP, Classic, FLASHlogic,
FastTrack, FineLine BGA, Quartus, MAX+PLUS, MAX+PLUS II, MegaCore, MultiVolt,
and individual device designations are trademarks and/or service marks of Altera
Corporation in the United States and other countries. Altera Corporation
acknowledges the trademarks of other organizations for their respective products
or services mentioned in this document. All rights reserved.
