ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

Years Ended

(In thousands, except per share amounts)

December 31, 2014

September 26, 2014

December 31, 2013

December 31, 2014

December 31, 2013

Net sales

$

479,873

$

499,606

$

454,367

$

1,932,089

$

1,732,572

Cost of sales

168,172

166,019

144,024

648,451

546,736

Gross margin

311,701

333,587

310,343

1,283,638

1,185,836

Operating expense

Research and development expense

107,314

112,078

106,643

418,170

385,185

Selling, general, and administrative expense

81,044

77,724

84,692

312,249

320,068

Amortization of acquisition-related intangible assets

2,465

2,465

1,850

9,859

4,824

Total operating expense

190,823

192,267

193,185

740,278

710,077

Operating margin ⁽²⁾

120,878

141,320

117,158

543,360

475,759

Compensation expense/(benefit) - deferred compensation plan

1,934

(487)

3,881

6,027

10,605

(Gain)/loss on deferred compensation plan securities

(1,934)

487

(3,881)

(6,027)

(10,605)

Interest income and other

(5,714)

(4,558)

(4,902)

(24,076)

(11,553)

Loss/(gain) reclassified from other comprehensive income

10

(59)

(24)

(140)

(153)

Interest expense

11,410

10,774

8,272

43,549

16,637

Income before income taxes

115,172

135,163

113,812

524,027

470,828

Income tax expense

4,041

17,154

14,878

51,369

30,763

Net income

$

111,131

$

118,009

$

98,934

$

472,658

$

440,065

Other comprehensive income/(loss):

Unrealized gain/(loss) on investments:

   Unrealized holding gain/(loss) on investments arising during period, net of tax of ($55), ($6), ($11), ($14) and ($1)

15,623

(4,929)

(26,811)

37,725

(33,424)

   Less: Reclassification adjustments for loss/(gain) on investments included in net income, net of tax of $1, $11, $2, $22 and $23

11

(48)

(22)

(118)

(130)

Other comprehensive income/(loss):

15,634

(4,977)

(26,833)

37,607

(33,554)

Comprehensive income

$

126,765

$

113,032

$

72,101

$

510,265

$

406,511

Net income per share:

Basic

$

0.37

$

0.38

$

0.31

$

1.53

$

1.37

Diluted

$

0.36

$

0.38

$

0.31

$

1.52

$

1.36

Shares used in computing per share amounts:

Basic

303,848

308,215

319,993

309,748

320,195

Diluted

305,614

310,184

322,018

311,897

323,018

Dividends per common share

$

0.18

$

0.18

$

0.15

$

0.66

$

0.50

Tax rate

3.5

%

12.7

%

13.1

%

9.8

%

6.5

%

% of Net sales:

Gross margin

65.0

%

66.8

%

68.3

%

66.4

%

68.4

%

Research and development ⁽¹⁾

22.9

%

22.9

%

23.9

%

22.2

%

22.5

%

Selling, general, and administrative

16.9

%

15.6

%

18.6

%

16.2

%

18.5

%

Operating margin ⁽²⁾

25.2

%

28.3

%

25.8

%

28.1

%

27.5

%

Net income

23.2

%

23.6

%

21.8

%

24.5

%

25.4

%

(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 and selling, general and administrative expenses and amortization of acquisition-related intangible assets, 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 gains and losses from related securities, we believe this presentation provides a more meaningful representation of our ongoing operating performance. A reconciliation of operating margin to income from operations follows:

Three Months Ended

Years Ended

(In thousands)

December 31, 2014

September 26, 2014

December 31, 2013

December 31, 2014

December 31, 2013

Operating margin (non-GAAP)

$

120,878

$

141,320

$

117,158

$

543,360

$

475,759

Compensation expense/(benefit) - deferred compensation plan

1,934

(487)

3,881

6,027

10,605

Income from operations (GAAP)

$

118,944

$

141,807

$

113,277

$

537,333

$

465,154