<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
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)
408-544-7000
(Registrant's telephone number, including area code)
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
filing requirements for at least the past 90 days.
Yes [X] No [ ]
Number of shares of common stock outstanding at October 30, 2000: 396,427,690
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<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION NUMBER
<S> <C> <C>
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2000
and December 31, 1999........................................ 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2000 and 1999...... 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999................ 5
Notes to Condensed Consolidated Financial Statements ................ 6
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 10
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk........... 16
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings .................................................. 17
ITEM 2: Changes in Securities and Use of Proceeds............................ 18
ITEM 6: Exhibits and Reports on Form 8-K .................................... 19
Signatures ..................................................................... 20
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1: Financial Statements
ALTERA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 296,788 $ 164,257
Short-term investments 726,017 681,409
----------- -----------
Total cash, cash equivalents,
and short-term investments 1,022,805 845,666
Accounts receivable, net 170,729 90,101
Inventories 177,339 64,027
Deferred income taxes 138,601 84,747
Other current assets 12,419 22,344
----------- -----------
Total current assets 1,521,893 1,106,885
Property and equipment, net 197,916 155,217
Investments and other assets 202,207 177,497
----------- -----------
$ 1,922,016 $ 1,439,599
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 81,698 $ 32,272
Accrued liabilities 28,718 26,758
Accrued compensation 39,835 25,301
Deferred income on sales to distributors 366,202 227,760
Income taxes payable 19,763 9,435
----------- -----------
Total current liabilities 536,216 321,526
----------- -----------
Stockholders' equity:
Common stock 400 397
Capital in excess of par value 478,032 326,241
Retained earnings 953,263 791,435
Deferred stock-based compensation (45,888) -
Accumulated other comprehensive loss (7) -
----------- -----------
Total stockholders' equity 1,385,800 1,118,073
----------- -----------
$ 1,922,016 $ 1,439,599
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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ALTERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 395,395 $ 215,121 $ 1,008,862 $ 599,303
Costs and expenses:
Cost of sales 132,694 76,707 341,969 218,129
Research and development 48,475 23,213 121,813 60,098
Selling, general and administrative 57,293 36,784 149,490 102,845
Acquired in-process research and development - - 6,305 -
----------- ----------- ----------- -----------
Total costs and expenses 238,462 136,704 619,577 381,072
----------- ----------- ----------- -----------
Income from operations 156,933 78,417 389,285 218,231
Interest and other income, net 12,912 7,987 33,858 18,610
----------- ----------- ----------- -----------
Income before income taxes and equity investment 169,845 86,404 423,143 236,841
Provision for income taxes (52,651) (28,081) (131,175) (76,973)
Equity in income (loss) of WaferTech, LLC 795 (2,751) (563) (6,243)
----------- ----------- ----------- -----------
Net income $ 117,989 $ 55,572 $ 291,405 $ 153,625
=========== =========== =========== ===========
INCOME PER SHARE:
Basic $ 0.30 $ 0.14 $ 0.73 $ 0.39
=========== =========== =========== ===========
Diluted $ 0.28 $ 0.13 $ 0.70 $ 0.37
=========== =========== =========== ===========
WEIGHTED SHARES OUTSTANDING:
Basic 398,540 397,760 398,267 395,312
=========== =========== =========== ===========
Diluted 419,396 416,351 419,232 413,991
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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ALTERA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 291,405 $ 153,625
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in loss of WaferTech, LLC 563 6,243
Depreciation and amortization 28,473 21,382
Write-off of acquired in-process research and development 6,305 -
Amortization of deferred stock-based compensation 5,268 -
Deferred income taxes (53,850) (2,501)
Changes in assets and liabilities:
Accounts receivable, net (80,628) (35,026)
Inventories (114,812) 10,878
Other assets 11,528 13,312
Accounts payable and accrued liabilities 64,067 3,908
Deferred income on sales to distributors 138,442 43,707
Income taxes payable 110,881 54,843
--------- ---------
Cash provided by operating activities 407,642 270,371
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (67,665) (19,047)
Net change in short-term investments (44,619) (163,054)
Investment in WaferTech, LLC - (37,500)
Acquisitions of DesignPRO and Right Track (11,535) -
Net change in long-term investments (2,000) (1,928)
--------- ---------
Cash used for investing activities (125,819) (221,529)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 31,115 22,296
Repurchase of common stock (187,385) (27,129)
Proceeds from sale of put warrants 6,978 -
--------- ---------
Cash used for financing activities (149,292) (4,833)
--------- ---------
Net increase in cash and cash equivalents 132,531 44,009
Cash and cash equivalents at beginning of period 164,257 131,029
--------- ---------
Cash and cash equivalents at end of period $ 296,788 $ 175,038
========= =========
Cash paid during the period for:
Income taxes $ 72,695 $ 27,294
Supplemental disclosure of non-cash activities:
Issuance of common stock and options for acquisitions $ 59,928 $ -
Deferred stock-based compensation $ 51,156 $ -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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ALTERA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Organization and Basis of Presentation:
The accompanying unaudited condensed consolidated financial information of
Altera Corporation and subsidiaries, referred to herein as we, us or our, has
been prepared by us in accordance with generally accepted accounting principles
and reflects all adjustments, consisting only of normal recurring adjustments,
which in our management's opinion are necessary to state fairly our financial
position, results of operations and cash flows as of and for the nine months
ended September 30, 2000 and 1999. The December 31, 1999 balance sheet was
derived from audited financial statements on that date. All significant
intercompany transactions and balances have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires our management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenue and expenses during the reporting
period. Actual results will differ from those estimates, and such differences
may be material to the financial statements. These condensed consolidated
financial statements should be read in conjunction with our audited consolidated
financial statements for the year ended December 31, 1999 included in our Annual
Report on Form 10-K, as filed on March 24, 2000 with the Securities and Exchange
Commission. The results of operations for the nine months ended September 30,
2000 are not necessarily indicative of the results to be expected for any future
periods.
This interim period ended on the Friday nearest September 30th. For presentation
purposes, the interim financial statements and accompanying notes refer to our
interim periods ending as of September 30th.
Note 2 - Balance Sheet Details (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Inventories:
Raw materials and work-in-process $ 121,290 $ 40,612
Finished goods 56,049 23,415
--------- ---------
$ 177,339 $ 64,027
========= =========
Property and equipment:
Land $ 30,849 $ 20,753
Building 86,032 80,893
Equipment and software 167,412 130,016
Office furniture and fixtures 16,839 11,755
Leasehold improvements 3,284 1,623
--------- ---------
304,416 245,040
Accumulated depreciation and amortization (106,500) (89,823)
--------- ---------
$ 197,916 $ 155,217
========= =========
</TABLE>
Note 3 - Comprehensive Income:
Comprehensive income, including net income and unrealized gain or loss on
available-for-sale investments, was $118.9 million for the three months ended
September 30, 2000 and $291.4 million for the nine months ended September 30,
2000. Comprehensive income approximated net income of $55.6 million for the
three months ended September 30, 1999 and $153.6 million for the nine months
ended September 30, 1999.
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Accumulated other comprehensive loss presented in the accompanying condensed
consolidated balance sheet as of September 30, 2000 consists of the accumulated
unrealized loss on available-for-sale investments, net of income taxes.
Note 4 - Common Stock Split:
On July 13, 2000, we declared a two-for-one stock split in the form of a 100
percent stock dividend to holders of record of our common stock on July 26,
2000. Dividend shares were distributed to stockholders on August 10, 2000. All
prior period share and income per share data have been retroactively restated to
give effect to the stock split for all periods presented.
Note 5 - Income Per Share:
Basic income per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period and excludes the
dilutive effect of stock options and restricted stock. Diluted income per share
reflects the dilution of potential common shares outstanding during a period. In
computing diluted income per share, the tax benefit resulting from employee
stock transactions, unamortized deferred stock-based compensation and the
average stock price for the period are used in determining the number of shares
assumed to be repurchased with the proceeds from the exercise of stock options.
A reconciliation of basic and diluted income per share is presented below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic:
Net income $117,989 $ 55,572 $291,405 $153,625
======== ======== ======== ========
Weighted average common shares outstanding 398,540 397,760 398,267 395,312
======== ======== ======== ========
Basic income per share $ 0.30 $ 0.14 $ 0.73 $ 0.39
======== ======== ======== ========
Diluted:
Net income $117,989 $ 55,572 $291,405 $153,625
======== ======== ======== ========
Weighted average common shares outstanding 398,540 397,760 398,267 395,312
Dilutive stock options 20,856 18,591 20,965 18,679
-------- -------- -------- --------
Weighted average common shares outstanding 419,396 416,351 419,232 413,991
======== ======== ======== ========
Diluted income per share $ 0.28 $ 0.13 $ 0.70 $ 0.37
======== ======== ======== ========
</TABLE>
Note 6 - Common Stock Repurchase:
During the second quarter of 2000, we repurchased 4,830,000 shares of common
stock for an aggregate cost of $187.4 million. In October 2000, we repurchased
an additional 5,700,000 shares of common stock for an aggregate cost of $175.6
million. The repurchased shares were retired upon acquisition. In connection
with our stock split declared in July 2000, our Board of Directors approved
increasing, from 12,000,000 to 24,000,000, the number of shares authorized for
repurchase under our repurchase program. In addition, during October 2000, our
Board of Directors approved a further increase of the number of shares
authorized for repurchase to 48,000,000. Since the inception of our repurchase
program in 1996, we have repurchased a total of 23,300,000 shares.
7
<PAGE> 8
Note 7 - Put Warrants:
In December 1999 and June 2000, we sold put warrants to independent third
parties. These put warrants entitle the holders the right to sell 2,500,000
shares of our common stock to us at specified prices on stated maturity dates.
The cash proceeds from the sale of the put warrants of $7.0 million in 2000 and
$2.4 million in 1999 have been included in capital in excess of par value. As of
September 30, 2000, warrants for 1,500,000 shares expired unexercised while
warrants for 1,000,000 shares were still outstanding. The outstanding warrants
expire in November 2000 and count against the 48,000,000 shares authorized for
repurchase under our common stock repurchase program. The outstanding put
warrants have exercise prices ranging from $32.97 to $34.40 per share.
Note 8 - New Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, or SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes standards for accounting and reporting on derivative instruments for
periods beginning after June 15, 2000 and early adoption is permitted. SFAS No.
133 requires that all derivative instruments be recognized in the balance sheet
as either assets or liabilities and measured at fair value. Furthermore, SFAS
No. 133 requires current recognition in earnings of changes in the fair value of
derivative instruments depending on the intended use of the derivative and the
resulting designation. In June 2000, the FASB issued SFAS No. 138, "Accounting
for Derivative Instruments and Hedging Activities - An Amendment of SFAS No.
133. SFAS No. 138 amends the accounting and reporting standards for certain
derivatives and hedging activities. We expect that our adoption of SFAS No. 133,
which will become effective in our fiscal year 2001, will not have a material
effect on our financial statements.
In March 2000, the FASB issued Interpretation No. 44, or FIN 44, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25". FIN 44 clarifies the application of Opinion No. 25 for (a) the
definition of employee for purposes of applying Opinion No. 25, (b) the criteria
for determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequences of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. The adoption of FIN 44, which
became effective July 1, 2000, did not have a material effect on our financial
statements.
Note 9 - Acquisitions:
We completed the acquisitions of all outstanding capital stock of DesignPRO
Inc., a developer and provider of intellectual property cores and custom design
solutions, on April 19, 2000, Right Track CAD Inc., a developer of architectural
and computer aided design tools for advanced programmable logic devices, on May
1, 2000, and Northwest Logic, Inc., a provider of system design services and
intellectual property specializing in telecommunications, data communications
and embedded processor systems design, on September 11, 2000.
We issued 934,381 shares of our common stock and paid approximately $11.5
million in cash, net of cash acquired of $0.3 million, for all of the capital
stock of DesignPRO, Right Track and Northwest Logic. In addition, we granted
options to purchase 323,146 shares of our common stock in exchange for all of
the stock options outstanding of DesignPRO and Right Track. The fair value of
our shares issued was approximately $45.3 million and the fair value of our
options granted was approximately $14.6 million. We incurred direct acquisition
costs of approximately $0.4 million, which were included in the purchase price.
Total consideration for the three acquisitions was $72.1 million. The
acquisitions were accounted for under the purchase method of accounting. The
purchase price was allocated to the tangible and intangible assets acquired and
liabilities assumed based in part on an independent appraisal of their
respective fair values. Total consideration paid in connection with the
acquisitions was attributable to the following (in thousands):
8
<PAGE> 9
<TABLE>
<CAPTION>
Amortization
Amount Period
---------- -------------
<S> <C> <C>
Deferred stock-based compensation $ 41,259 2 to 4 years
Market ready technology 21,446 3 to 6 years
In-process research and development 6,305 -
Other intangible assets 2,481 3 years
Tangible assets and working capital 590 -
---------
$ 72,081
=========
</TABLE>
No supplemental pro forma information is presented due to the immaterial effect
on prior period results of operations.
The allocation of amounts to market ready technology and in-process research and
development were consistent with widely recognized appraisal practices. Our
analysis resulted in a valuation of market ready technology at $21.4 million.
Market ready technology represents technologies that had reached technological
feasibility, and therefore are capitalizable. We are amortizing the market ready
technology on a straight-line basis over a period of three to six years. Our
analysis also resulted in a $6.3 million charge to acquired in-process research
and development. The acquired in-process technology represents the appraised
value of technologies in the development stage that had not yet reached
technological feasibility and do not have alternative future uses. We expensed
this amount as a non-recurring charge upon consummation of the acquisitions.
We determined the value assigned to in-process research and development by
identifying research projects in areas for which technological feasibility had
not been established. For both the Right Track and DesignPRO valuations, we
estimated the expected cash flows from the projects once commercially viable. We
then discounted the net cash flows back to their present value and applied a
percentage of completion. We determined the percentage of completion using
milestones representing our management's estimate of effort, value added, and
degree of difficulty of the portion of each project completed as of the
acquisition date, as compared to the remaining research and development to be
completed to bring each project to technical feasibility.
If we do not successfully develop our research projects discussed above, our
sales and profitability may be adversely affected in future periods and the
value of other intangible assets acquired may become impaired. Our management
believes that the in-process research and development charge is valued
consistently with the SEC staff's current views regarding valuation
methodologies. We cannot assure you that the SEC staff will not take issue with
any assumptions used in our valuation model and require us to revise the amount
allocated to in-process research and development.
Note 10 - Deferred Stock-Based Compensation:
During the second quarter of 2000, we recorded aggregate deferred stock-based
compensation of $41.3 million representing the value of restricted stock issued
in conjunction with the acquisitions of DesignPRO and Right Track. During the
third quarter of 2000, we recorded deferred stock-based compensation of $7.5
million in conjunction with certain stock options granted to our new employees.
Deferred stock-based compensation represents the difference between the grant
price and the quoted market price of our stock at the date of grant. We are
amortizing deferred stock-based compensation over the vesting period of two to
four years. Amortization of deferred stock-based compensation was $3.5 million
for the three months ended September 30, 2000 and $5.3 million for the nine
months ended September 30, 2000.
9
<PAGE> 10
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations, as well as information contained elsewhere
in this Report, contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward looking statements are generally written in the
future tense and/or are preceded by words such as "expects," "suggests,"
"believes," "anticipates," or "intends." Forward looking statements include
statements regarding future product and research and development efforts,
expected market demand for silicon wafers and potential supply shortages,
availability of funds and cash to finance operations and market risks relating
to our investment portfolio. Our future results of operations and the other
forward looking statements contained in this Report involve a number of risks
and uncertainties, many of which are outside our control. Some of these risks
and uncertainties are described in proximity to forward looking statements in
this Report. Factors that could cause actual results to differ materially from
projected results include, but are not limited to, risks associated with our
ability to achieve continued cost reductions and maintain gross margins, our
ability to continue to achieve die size reductions, our ability to achieve and
maintain appropriate inventory mix and levels and respond successfully to
changes in product demand, the ability of price reductions to increase demand
and strengthen our market share over the long term, successful development and
subsequent introduction of new products through investment in research and
development and application of new process technologies to old and new product
lines, market acceptance of our new products, continued demand for our existing
products, and general market conditions. Additional risk factors are disclosed
in our 1999 Annual Report and Form 10-K on file with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
Sales
Beginning with the second quarter of 2000, we classify our products by
supply voltage, replacing the previous methodology that classified products by
the categories New, Mainstream and Mature. We have updated all prior data to
reflect this change. In general, customers prefer products with lower supply
voltages because they use less power and dissipate less heat, normally resulting
in lower overall system cost. Lower supply voltages result from more advanced
fabricaton processes and yield higher performance at a lower cost. Thus, supply
voltage correlates with product maturity: lower supply voltages represent newer
products. We classify our products into the following supply voltage categories:
- 1.8-volt products consist of the APEX 20KE family
- 2.5-volt products include the MAX 7000B, FLEX 10KE, APEX 20K and
ACEX 1K families
- 3.3-volt products include the MAX 3000A/7000A, FLEX 6000 and FLEX
10KA families
- 5.0-volt products consist of the Classic, MAX 7000/7000S, MAX 9000,
FLEX 8000 and FLEX 10K families
- Other products include tools, FLASHlogic, configuration devices and
mask programmable logic devices, or MPLDs
Sales during the third quarter of 2000 were $395.4 million, 83.8% higher
than the $215.1 million reported for the same period last year. The increase in
sales was primarily due to higher unit sales in all supply voltage categories.
The increase in sales was partially offset by a decrease in the average unit
selling prices of higher voltage products. Sales of the 1.8-volt products, which
began shipping during the fourth quarter of 1999, were $18.2 million for the
three months ended September 30, 2000. Sales for 2.5-volt products increased
370.9% to $67.6 million from $14.3 million, 3.3-volt product sales increased
132.8% to $133.3 million from $57.3 million, 5.0-volt product sales increased
20.3% to $156.0 million from $129.7 million and sales of other products
increased 47.2% to $20.3 million from $13.8 million.
Sales during the nine months ended September 30, 2000 were $1,008.9
million, 68.3% higher than the $599.3 million reported for the same period last
year. The increase in sales was primarily due to higher unit sales in all supply
voltage categories. The increase in sales was partially offset by a decrease in
the average unit selling prices of higher voltage products. Sales of the
1.8-volt products, which began shipping during the fourth quarter of 1999, were
$27.3 million for the nine months ended September 30, 2000. Sales for 2.5-volt
products increased 511.6% to $140.9 million from $23.0 million, 3.3-volt product
sales increased 138.3% to $335.5 million from $140.8 million, 5.0-volt product
sales increased 14.9% to $450.3 million from $392.0 million and sales of other
products increased 26.1% to $54.9 million from $43.5 million.
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As a percentage of total sales, sales in North America, Europe and Asia
Pacific increased, while sales in Japan declined during the first nine months of
2000 compared to the first nine months of 1999. North America sales increased to
57.5% of sales from 56.3%, Europe increased to 21.7% from 18.7%, Asia Pacific
increased to 6.0% from 5.8%, while Japan decreased to 14.8% from 19.2%. In
absolute dollars, sales in North America increased 71.9% to $579.6 million from
$337.2 million, Europe increased 95.1% to $219.1 million from $112.2 million,
Asia Pacific increased 73.4% to $60.7 million from $35.0 million and Japan sales
increased 30.1% to $149.5 million from $114.9 million.
As a percentage of total sales for the nine months ended September 30,
2000, sales to the communications market segment represented 68.0% of our
business as compared to 64.6% during the first nine months of 1999. The
electronic data processing market segment was 16.8% compared to 16.7%, the
industrial market segment was 10.2% compared to 12.0%, the consumer market
segment was 2.1% compared to 3.0% and other markets were 2.9% compared to 3.7%.
Our management believes that future revenue growth will be driven by product
demand in the communication market, but we cannot assure you that this will
occur.
In October 1999, we sold to Cypress Semiconductor Corporation the
exclusive right to manufacture, market and sell our MAX 5000 product family and
our equity interest in Cypress Semiconductor (Texas), Inc. Excluding the MAX
5000 product family, total sales during the three months ended September 30,
2000 grew 86.3%, and total sales during the nine months ended September 30, 2000
grew 70.9%, each over the same period last year.
Gross Margin
Gross margin, as a percentage of sales, for the three months ended
September 30, 2000 was 66.4% compared to 64.3% for the same period last year.
For the nine months ended September 30, 2000, gross margin was 66.1% compared to
63.6% for the same period last year. The increases in gross margin were
primarily attributable to cost reductions as a result of manufacturing process
improvements.
Yields on newer, lower supply voltage products continued to improve for
the nine months ended September 30, 2000 over the same period a year ago. This
includes improvements in the APEX 20K/20KE, FLEX 10KE and FLEX 10KA product
families. We continue to spend a significant amount of financial resources to
improve production yields on both new and established products. Difficulties in
production yields can occur when we begin production of new products, transition
to new processes or when Taiwan Semiconductor Manufacturing Company, or TSMC,
our principle wafer supplier, moves production of a product from one
manufacturing plant to another. These difficulties can potentially result in
significantly higher costs and lower product availability. For example, in the
fourth quarter of 1999, process control issues associated with WaferTech's
volume ramp up resulted in low die yields on FLEX 10KA and FLEX 10KE products
leading to reduced product availabilty in these families. As a result, we were
unable to support distributor stocking at desired levels and in some cases could
not meet end customer demand. Our management expects to continue to introduce
new and established products using new process technologies and may encounter
similar start-up difficulties during the transition to such process
technologies. Further, production throughput times vary considerably among our
wafer suppliers, and we may experience delays from time to time in processing
some of our products which also may result in higher costs and lower product
availability.
Research and Development
Research and development expenses for the three months ended September
30, 2000 were $48.5 million, or 12.2% of sales, compared to $23.2 million, or
10.8% of sales, for the same period last year. For the nine months ended
September 30, 2000, excluding the $6.3 million one-time acquired in-process
research and development charge, research and development expenses were $121.8
million, or 12.1% percent of sales, compared to $60.1 million, or 10.0% of
sales, for the first nine months of 1999. Historically, the level of research
and development expenses as a percentage of sales has fluctuated in part due to
the timing of the purchase of masks and wafers used in development and
prototyping of new products. We expect that, in the long term, research and
development expenses will increase in absolute dollars primarily due to our
efforts to develop new products. Research and development expenses include
expenditures for labor, prototype and developmental wafers, the amortization of
deferred stock-based compensation, and expenses for the development of process
technology, new packages, and software to support new products and design
environments.
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Research and development expenses increased $25.3 million, or 109.1%,
for the three months ended September 30, 2000, and $61.7 million, or 102.7%, for
the nine months ended September 30, 2000, each over the same period last year.
The increases in absolute dollars were primarily a result of increased
headcount, additional spending on masks, wafers, package development and outside
development services relating to the development of new products including the
FLEX 10KE, MAX 7000B and APEX 20KE families, as well as development of our
Quartus software and Excalibur embedded processor solutions. During the second
quarter of 2000, we recorded deferred stock-based compensation of $41.3 million
for the acquisitions of DesignPRO and Right Track which is being amortized to
research and development expense over a period of two to four years.
Amortization of deferred stock-based compensation included in research and
development expenses was $3.1 million for the three months ended September 30,
2000, and $5.2 million for the nine months ended September 30, 2000.
We expect to continue to make significant investments in the development
of MAX 7000A/7000B, APEX 20K/20KE, Quartus software, Excalibur embedded
processor solutions and future products. During the first quarter of 1999, we
shipped APEX 20K, a new family of devices, and Quartus, our new fourth
generation software design tool. During the fourth quarter of 1999, we began
shipping our APEX 20KE family of devices. The rollout of the 1.8-volt APEX 20KE
product family progressed further during the second quarter of 2000, during
which time we began shipping four new devices including the APEX 20K1500E, one
of the world's largest programmable devices. The APEX 20KE family offers
advanced features over the APEX 20K family including lower power consumption,
faster performance, expanded I/O support and smaller die sizes. APEX 20K/20KE
devices utilize a new architecture for programmable logic and address higher
density designs. APEX 20K/20KE devices are supported exclusively by Quartus.
Also during the second quarter of 2000, we announced our new Excalibur embedded
processor solutions. Excalibur solutions combine programmable logic, memory and
a processor core, allowing users to integrate an entire system on a single
programmable logic device. These solutions provide programmable flexibility and
system-level integration while bringing advanced processor technology to the
broad marketplace. Our management expects APEX 20K/20KE devices, Quartus
software and Excalibur solutions to be successful in the marketplace, however,
the commercial success of these products depends on market acceptance of the use
of APEX 20K/20KE devices in high-density designs, as well as the acceptance of
the Quartus design software and Excalibur solutions. We cannot assure you that
any of our products will achieve market acceptance.
We also continue to focus our efforts on the development of new
programmable logic chips, related development software and hardware, and
advanced semiconductor wafer fabrication processes. However, we cannot assure
you that we will accomplish our goals in the development and subsequent
introduction of new products and manufacturing processes. Also, we cannot assure
you that our new products will achieve market acceptance, that the new
manufacturing processes will be successful, or that our suppliers will provide
us with the quality and quantity of wafers and materials that we require. We
must continue to develop and introduce new products in a timely manner to help
counter the semiconductor industry's historical trend of declining prices as
products mature.
Selling, General and Administrative
Selling, general and administrative expenses were $57.3 million, or
14.5% of sales, for the three months ended September 30, 2000 and $36.8 million,
or 17.0% of sales, for the three months ended September 30, 1999. Selling,
general and administrative expenses were $149.5 million, or 14.8% of sales, for
the nine months ended September 30, 2000 compared to $102.8 million, or 17.2% of
sales for the nine months ended September 30, 1999. Although total selling,
general and administrative expenses increased, they decreased as a percentage of
sales because of strong revenue growth. Selling, general and administrative
expenses include salary expenses related to field sales, marketing and
administrative personnel, commissions and incentive expenses, advertising and
promotional expenditures, and legal expenses. Selling, general and
administrative expenses also include costs related to the direct sales force and
field application engineers who work in field sales offices worldwide and
stimulate demand by assisting customers in the use and proper selection of our
products.
Selling, general and administrative expenses increased $20.5 million, or
55.7%, for the three months ended September 30, 2000, and $46.7 million, or
45.4% for the nine months ended September 30, 2000, each over the same period
last year. The increases in absolute dollars were mainly driven by increased
headcount for sales, marketing and administration personnel, higher advertising
expenses, and higher commission and incentive expenses associated with increased
sales.
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In-Process Research and Development
During the second quarter of 2000, we recorded a non-recurring charge of
$6.3 million to in-process research and development related to the purchase of
DesignPRO and Right Track. We determined this non-recurring charge using
valuation techniques generally used by appraisers in the high-technology
industry. We immediately expensed this non-recurring charge in the period of
acquisition because technological feasibility had not been established and no
alternative use had been identified. We discuss this charge in more detail in
Note 9 to the Condensed Consolidated Financial Statements.
Income from Operations
Income from operations was $156.9 million, or 39.7% of sales, for the
three months ended September 30, 2000 compared to $78.4 million, or 36.5% of
sales, for the three months ended September 30, 1999, an increase of $78.5
million or 100.1%. Income from operations was $389.3 million, or 38.6% of sales,
for the nine months ended September 30, 2000 compared to $218.2 million, or
36.4% of sales for the nine months ended September 30, 1999, an increase of
$171.1 million or 78.4%. The year over year increase in operating income, as a
percentage of sales, was primarily due to improvements in gross margin partially
offset by increased research and development expenses as a percentage of sales.
Interest and Other Income, Net
Interest and other income was $12.9 million for the three months ended
September 30, 2000 compared to $8.0 million for the three months ended September
30, 1999, an increase of $4.9 million or 61.3%. Interest and other income was
$33.9 million for the nine months ended September 30, 2000 compared to $18.6
million for the nine months ended September 30, 1999, an increase of $15.3
million or 82.3%. Interest and other income consists mainly of interest income
on investments in high quality fixed income securities. The increase in interest
and other income was primarily due to the increase in interest income related to
higher investment balances and higher interest rates.
Provision for Income Taxes
Our effective tax rate was 31.0% for the nine months ended September 30,
2000 and 32.5% for the nine months ended September 30, 1999. The year over year
reduction of the effective tax rate primarily resulted from the reinstitution of
the research and development tax credit and a change in the geographic mix of
revenue.
Equity Investment
In June 1996, we formed WaferTech, LLC, a joint venture company, with
TSMC and several other partners to build and operate a wafer manufacturing plant
in Camas, Washington. In return for a $140.4 million cash investment, we
received an 18% equity ownership in WaferTech and certain obligations and rights
to procure up to 27% of WaferTech's output at market prices. In January 1999, we
purchased from Analog Devices, Inc. an additional 5% equity ownership interest
in WaferTech for approximately $37.5 million, increasing our ownership interest
to 23%. This increased investment in WaferTech provides us with additional
obligations and rights to procure up to 35% of WaferTech's future output. In
October 1999, we made an additional $23.0 million cash investment in WaferTech.
Despite this additional cash investment, our ownership interest or obligations
and rights for the procurement of WaferTech's output did not change. We account
for our investment under the equity method based on our ability to exercise
significant influence over WaferTech's operating and financial policies. For the
three months ended September 30, 2000, we recorded a marginal profit in
WaferTech, as compared to a loss of $2.8 million for the same period a year ago.
For the nine months ended September 30, 2000, we recorded a marginal loss in
WaferTech, as compared to a loss of $6.2 million for the same period a year ago.
In past quarters, WaferTech had experienced lower than forecast production
yields resulting in lower than forecast output. During the three months ended
September 30, 2000, WaferTech's production volumes and yields increased over
prior periods and met our targeted levels. We cannot assure you that WaferTech
will continue to make a profit or that WaferTech will not have an adverse impact
on our operating results.
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Future Results
Our industry is intensely competitive. Future operating results will
depend on our ability to develop, manufacture and sell complex semiconductor
components and programming software that offer customers greater value than
solutions offered by competing vendors. We may not succeed in developing,
manufacturing or selling competitive products. We are developing programmable
chips for applications that are presently served by other ASIC vendors. Many of
these vendors have substantially greater financial, technical and marketing
resources than we do and have well-established market positions and a solution
that has been proven technically feasible and economically competitive over
several decades. We cannot assure you that we will be successful in displacing
ASIC vendors in the targeted applications and densities. Furthermore, other
programmable logic vendors are targeting these applications and may be
successful in securing market share from us. Moreover, our customers
increasingly use standard cell technologies to achieve greater integration in
their systems; this may not only impede our efforts to penetrate the ASIC
market, but may also displace our products in the applications that we presently
serve.
As a semiconductor company, we operate in a dynamic market characterized
by rapid product obsolescence. We continue to focus our efforts on developing
new programmable logic chips, related development software and hardware and
advanced semiconductor wafer fabrication processes. We cannot assure you that we
will be able to continue to develop and introduce new products and manufacturing
proceeses or that our products and processes will achieve market acceptance or
be successful. If we do not successfully define, develop and introduce
competitive new products and enhance existing products in response to both
evolving demands of the market place and competitive product offerings, our
future operating results would be adversely affected.
We own numerous patents and patent applications and have technology
licensing agreements giving us rights to design, manufacture and package
products using certain patents owned by others. We cannot assure you that our
intellectual property rights will provide meaningful protection from competition
or that we will rely on such rights in developing additional products. We may be
unable to adequately protect our intellectual property rights and may face
significant future litigation expenses.
We depend significantly upon subcontractors to manufacture silicon
wafers and assemble, test and ship product to end customers. We also depend on
all of our subcontractors, and especially our principal foundry partner, TSMC,
to improve process technologies in a timely manner to enhance our product
designs and cost structure. Our success depends, in part, on TSMC's ability to
remain successful in its highly competitive industry. Their inability to do so
could have a severe negative impact on us. The vast majority of our products are
manufactured and shipped to customers by subcontractors located in Asia,
principally Hong Kong, Japan, Korea, Malaysia, the Philippines and Taiwan.
Disruptions or adverse supply conditions arising from market conditions,
political strife, labor disruptions and other factors could adversely affect our
future results. Market demand for silicon wafers increased significantly during
the course of 1999 and through the third quarter of 2000, while supply of such
wafers has increased at a much slower rate. This has resulted in a firmer
pricing environment, less responsiveness to requests for expedited delivery by
wafer suppliers, and in some cases, unsatisfied demand. In general, the lead
time to increase market wafer supply by building additional wafer fabrication
facilities is approximately two years and in periods where demand for wafers
increases rapidly for a prolonged period, market shortages tend to occur. Our
management believes that for at least the next several quarters, demand will
exceed the foundry industry's ability to supply silicon wafers and that certain
companies that rely on the foundry industry will not succeed in securing all of
the wafers that they desire, thereby constraining their revenues. We believe
that under such circumstances it is important to have close business
relationships with wafer suppliers in order to receive the desired quantity of
product. We believe that we enjoy close working relationships with our principal
wafer supplier, TSMC. However, we cannot assure you that we will succeed in
securing our total desired output from TSMC or that the scarcity of silicon
wafers will not impair or prevent any future growth of our business.
Natural or man-made disasters, normal process fluctuations and variances
in manufacturing yields could have a severe negative impact on our operating
capabilities. For example, in September 1999, a major earthquake struck Taiwan
resulting in widespread physical damage and loss of life. The earthquake halted
wafer fabrication production at our primary vendor, TSMC, for several days and
then only limited production began. Nearly two weeks passed before full
production resumed, and a portion of the inventory in the production process was
scrapped as a result of damage incurred during the earthquake. We have sought to
diversify our operating risk by obtaining silicon wafers from WaferTech.
WaferTech began production of silicon wafers in October 1998 and achieved volume
production in 1999. In past quarters, WaferTech had experienced lower than
forecast production yields resulting in lower than forecast output. During the
three months ended September 30, 2000, WaferTech's production volumes and yields
increased over prior periods and met our targeted levels.
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We cannot assure you that the worldwide supply and demand for semiconductor
wafers will be such that WaferTech will continue to make a profit or that
WaferTech will not have an adverse impact on our operating results.
A number of factors outside of our control, including general economic
conditions and cycles in world markets, exchange rate fluctuations or a lack of
growth in our end markets could also adversely impact future results. The
semiconductor industry is highly cyclical and has historically been subject to
significant downturns as a result of diminished demand, general reductions in
inventory levels by customers, excess production capacity and accelerated
declines in average selling prices. Because of these and other factors that
might affect our operating results, you should not consider our past financial
performance as an indicator of our future performance, and you should not use
historical trends to anticipate our future results. In addition, the price of
our common stock has fluctuated significantly due to the cyclical nature of the
semiconductor industry and other factors.
Liquidity and Capital Resources
During the first nine months of 2000, cash, cash equivalents and
short-term investments increased by $177.1 million to $1,022.8 million from
$845.7 million at December 31, 1999. During the first nine months of 2000, our
operating activities generated net cash of $407.6 million. This cash flow was
primarily attributable to net income of $291.4 million, adjusted by non-cash
items including an increase in deferred income on sales to distributors of
$138.4 million, an increase of income taxes payable of $110.9 million, an
increase in accounts payable and accrued liabilities of $64.1 million,
depreciation and amortization of $28.5 million, the one-time write-off of $6.3
million for acquired in-process research and development and amortization of
deferred stock-based compensation of $5.3 million. These items were partially
offset by increases in inventories of $114.8 million, accounts receivable of
$80.6 million and deferred income taxes of $53.9 million.
Cash used for investing activities of $125.8 million for the first nine
months of 2000 was primarily the result of net purchases of short-term
investments of $44.6 million, cash payments of $11.5 million for the
acquisitions of DesignPRO and Right Track, as well as our $67.7 million
investment in land, manufacturing and data processing equipment and software,
and building improvements in our headquarter facility.
For the first nine months of 2000, we used $149.3 million in net cash
for financing activities. We repurchased 4.8 million shares of our common stock
for $187.4 million, partially offset by net proceeds of $31.1 million from the
issuance of 7.1 million shares of common stock to employees through various
option and employee stock purchase plans. In addition, we received $7.0 million
from the sale of put warrants.
Financial Condition
Since our inception, we have used a combination of equity and debt
financing and cash generated from operations to support our operating
activities.
As of September 30, 2000, we had $1,022.8 million of cash, cash
equivalents and short-term investments available to finance our operating
activities and future growth. We believe the available sources of funds and cash
we expect to generate from operations will be adequate to finance current
operations, capital expenditures and common stock repurchases for at least the
next year.
Impact of Currency and Inflation
We purchase the majority of our materials and services in U.S. dollars,
and transact our foreign sales in U.S. dollars. We have, in the past, entered
into forward contracts to hedge against currency fluctuations and to meet
contractual commitments denominated in foreign currencies. During the second
quarter of 2000, we entered into a forward exchange contract to purchase
Malaysian ringgit to meet a portion of our firm contractual commitments of
ringgit required. The contract will be settled in June 2001. We may enter into
similar contracts from time to time should conditions appear favorable.
Inflation has not significantly impacted our financial results.
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ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
Our investment portfolio consisted of fixed income securities of $919.9
million as of September 30, 2000 and $710.3 million as of September 30, 1999.
These securities, like all fixed income instruments, are subject to interest
rate risk and will decline in value if market interest rates increase. If market
interest rates were to increase immediately and uniformly by 10% from levels as
of September 30, 2000 and September 30, 1999, the decline in the fair value of
the portfolio would not be material. Additionally, we have the ability to hold
our fixed income investments until maturity and, therefore, we would not expect
to recognize an adverse impact on income or cash flows.
We have international subsidiaries and branch operations and are,
therefore, subject to foreign currency rate exposure. To date, our exposure to
exchange rate volatility has not been significant. If the foreign currency rates
fluctuate by 10% from rates at September 30, 2000 and September 30, 1999, our
financial position and results of operations would not be materially affected.
However, we cannot assure you there will not be a material impact in the future.
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PART II OTHER INFORMATION
ITEM 1: Legal Proceedings
We are a party to lawsuits and may in the future become a party to
lawsuits involving various types of claims, including, but not limited to,
unfair competition and intellectual property matters. Legal proceedings tend to
be unpredictable and costly and may be affected by events outside of our
control. We cannot assure you that litigation will not have an adverse effect on
our financial position or results of operations. Our major litigation matters as
of September 30, 2000 are described below.
In June 1993, Xilinx, Inc. sued us for monetary damages and injunctive
relief based on our alleged infringement of certain patents held by Xilinx. In
June 1993, we sued Xilinx for monetary damages and injunctive relief based on
Xilinx's alleged infringement of certain patents held by us. In April 1995, we
filed a separate lawsuit against Xilinx in Delaware, Xilinx's state of
incorporation, seeking monetary damages and injunctive relief based on Xilinx's
alleged infringement of one of our patents. In May 1995, Xilinx counter-claimed
against us in Delaware, asserting defenses and seeking monetary damages and
injunctive relief based on our alleged infringement of certain patents held by
Xilinx. Subsequently, the Delaware case was transferred to California. In
October 1998, both parties filed motions for summary judgment with respect to
certain issues in the first two cases regarding infringement or non-infringement
and validity or invalidity of the patents at issue in the respective cases. In
October 1999 - December 1999, the court ruled on the motions. In the Xilinx
suit, the court ruled that one of Xilinx's claims is invalid and another claim
was withdrawn. The court also ruled that issues of infringement and validity on
the remaining claims were subject to trial which began October 5, 2000 and is
scheduled to be completed in November 2000. In our suit, the court granted that
one of our patents is invalid, granted that one patent is not infringed, and
granted another patent is not literally infringed but denied non-infringement
under the doctrine of equivalence. In October 2000, Xilinx withdrew its claims
against our MAX 5000, MAX 7000 and MAX 9000 family products. Court ordered
mediation which began February 24, 2000 did not reach a settlement and has been
terminated. Due to the nature of the litigation with Xilinx and because the
lawsuits are in the liability trial stage, our management cannot estimate the
total expense, the possible loss, if any, or the range of loss that we may
ultimately incur in connection with the allegations. Our management cannot
ensure that Xilinx will not succeed in obtaining significant monetary damages or
an injunction against the manufacture and sale of our products, including but
not limited to our FLEX 8000 family products, or succeed in invalidating our
other patents. Although we cannot make any assurances as to the results of these
cases, we believe that we have meritorious defenses to the claims asserted in
the Xilinx suit and intend to pursue our claims and defend ourselves vigorously
in this matter.
In May 2000, we sued Xilinx, seeking monetary damages and injunctive
relief based on Xilinx's alleged infringement of certain patents held by us. In
July 2000, Xilinx filed a counterclaim against us alleging infringement of
certain patents held by Xilinx. The court has issued an order setting the claim
construction hearing for December 6 and 7, 2000. Due to the nature of the
litigation with Xilinx and because the lawsuit is still in the pre-trial stage,
our management cannot estimate the total expenses, the possible loss, if any, or
the range of loss that may ultimately be incurred in connection with the
counterclaim allegations. Although we cannot make any assurances as to the
results of this case, we believe that we have meritorious defenses to Xilinx'
counterclaim and intend to pursue our claims and defend ourselves vigorously in
this matter.
In August 1994, Advanced Micro Devices, Inc., or AMD, sued us seeking
monetary damages and injunctive relief based on our alleged infringement of
certain patents held by AMD. In September 1994, we answered the complaint
asserting that we are licensed to use the patents which AMD claims are infringed
and filed a counterclaim against AMD alleging infringement of certain patents
held by us. In October 1997, upon completion of trials bifurcated from the
infringement claims, the District Court ruled that we are licensed under all
patents asserted by AMD in the suit. In December 1997, AMD filed a Notice of
Appeal of the District Court's rulings. In April 1999, the Federal Circuit Court
ruled in AMD's favor on its appeal, finding that we are not licensed to AMD's
patents, and remanded the case back to the District Court for further
proceedings. In 1999, Lattice Corporation entered into an agreement with AMD
which includes assuming both the claims against us and the claims against AMD
and has replaced AMD in the suit with Vantis, a wholly owned subsidiary of
Lattice. Due to the nature of the litigation, our management cannot estimate the
total expense, the possible loss, if any, or the range of loss that may
ultimately be incurred in connection with the allegations. We cannot ensure that
Lattice will not succeed in obtaining significant monetary damages or an
injunction against the manufacture and sale of the Classic, MAX 7000, FLEX 8000,
MAX 9000 and FLEX 10K product families, or succeed in
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invalidating any of our patents remaining in the suit. Although we cannot make
any assurances as to the results of this case, we intend to pursue our claims
and defend ourselves vigorously in this matter.
In May 2000, we sued Lattice seeking monetary damages and injunctive
relief based on Lattice's alleged infringement of certain patents held by us. In
July 2000, Lattice filed a counterclaim against us alleging infringement of
certain patents held by Lattice. Due to the nature of the litigation with
Lattice and because the lawsuit is still in the pre-trial stage, our management
cannot estimate the total expenses, the possible loss, if any, or the range of
loss that may ultimately be incurred in connection with the counterclaim
allegations. Although we cannot make any assurances as to the results of this
case, we intend to pursue our claims and defend ourselves vigorously in this
matter.
In November 1999, we sued Clear Logic Inc. alleging that Clear Logic is
unlawfully appropriating our registered mask work technology in violation of the
federal mask work statute and that Clear Logic has unlawfully interfered with
our relationships and contracts with our customers. The lawsuit seeks
compensatory and punitive damages and an injunction to stop Clear Logic from
unlawfully using our mask work technology and from interfering with our
customers. Clear Logic has answered the complaint by denying that it is
infringing our mask work technology and denying that it has unlawfully
interfered with our relationships and contracts with our customers. Clear Logic
has also filed a counterclaim against us for unfair competition under California
law alleging that we have made false statements to our customers regarding Clear
Logic. Due to the nature of the litigation with Clear Logic and because the
lawsuit is still in the pre-trial stage, our management cannot estimate the
total expenses, the possible loss, if any, or the range of loss that may
ultimately be incurred in connection with the counterclaim allegations. Although
we cannot make any assurances as to the results of this case, we intend to
pursue our claims and defend ourselves vigorously in this matter.
ITEM 2: Changes in Securities and Use of Proceeds
As part of the consideration for our acquisition of all outstanding
capital stock of Northwest Logic, Inc. on September 11, 2000, we issued 48,727
shares of our common stock to the former shareholders of Northwest Logic. In
addition, as part of an employment package we granted former employees of
Northwest Logic options to purchase 153,945 shares of our common stock. The
options vest in 25% increments over four years and have a ten-year term. We
issued these shares and granted these options in a private placement in reliance
upon Section 4(2) of the Securities Act of 1933, as amended.
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ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation
filed with the Delaware Secretary of State on
June 9, 2000.(1)
3.2 By-laws of the Registrant as adopted May 5, 1996
(which became the By-laws of the Registrant on
June 19, 1997).(2)
4.1 Specimen copy of certificate for shares of Common Stock
of the Registrant.(3)
10.56(a)+ 2000 Non-Qualified Stock Option Plan No. 1.
10.56(b)+ Form of Stock Option Agreement for Former Employees of
Northwest Logic, Inc.
10.56(c)+ Form of Stock Option Agreement for Former Founding
Shareholders of Northwest Logic, Inc.
27.1 Financial Data Schedule for the nine months ended
September 30, 2000.
+ Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Report on
Form 10-Q.
(1) Incorporated by reference to identically numbered exhibit
filed in response to Item 6(a), "Exhibits," of the
Registrant's Report on Form 10-Q for the quarter ended
June 30, 2000.
(2) Incorporated by reference to identically numbered exhibit
filed in response to Item 6(a), "Exhibits," of the
Registrant's Report on Form 10-Q for the quarter ended
June 30, 1997.
(3) Incorporated by reference to identically numbered exhibit
filed in response to Item 14(a), "Exhibits," of the
Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1997.
(b) Reports on Form 8-K
None.
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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 thereunto duly authorized.
ALTERA CORPORATION
/s/ Nathan Sarkisian
-----------------------------------------------
Nathan Sarkisian, Senior Vice President
(duly authorized officer) and Chief
Financial Officer (principal financial officer)
Date: November 1, 2000
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EXHIBIT INDEX
-------------
3.1 Amended and Restated Certificate of Incorporation filed with
the Delaware Secretary of State on June 9, 2000.(1)
3.2 By-laws of the Registrant as adopted May 5, 1996 (which
became the By-laws of the Registrant on June 19, 1997).(2)
4.1 Specimen copy of certificate for shares of Common Stock of
the Registrant.(3)
10.56(a)+ 2000 Non-Qualified Stock Option Plan No. 1.
10.56(b)+ Form of Stock Option Agreement for Former Employees of
Northwest Logic, Inc.
10.56(c)+ Form of Stock Option Agreement for Former Founding
Shareholders of Northwest Logic, Inc.
27.1 Financial Data Schedule for the nine months ended September
30, 2000.
+ Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Report on Form 10-Q.
(1) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's Report
on Form 10-Q for the quarter ended June 30, 2000.
(2) Incorporated by reference to identically numbered exhibit filed
in response to Item 6(a), "Exhibits," of the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1997.
(3) Incorporated by reference to identically numbered exhibit filed
in response to Item 14(a), "Exhibits," of the Registrant's Report
on Form 10-K for the fiscal year ended December 31, 1997.
21
