Altera Announces Second Quarter Results

Product Category Description

New Products include the Arria^® 10, Stratix^® V, Stratix IV, Arria V, Arria II, Cyclone^®V, Cyclone IV, MAX^®10, MAX V, HardCopy^® IV devices and Enpirion PowerSoCs.
Mainstream Products include the Stratix III, Cyclone III, MAX II and HardCopy III devices.
Mature and Other Products include the Stratix II, Stratix, Arria GX, Cyclone II, Cyclone, MAX 3000A, MAX 7000, MAX 7000A, MAX 7000B, MAX 7000S, MAX 9000, HardCopy II, HardCopy, FLEX^® series, APEX™ series, Mercury™, Excalibur™ devices, configuration and other devices, intellectual property cores, and software and other tools.

Forward-Looking Statements

Statements in this press release that are not historical are "forward-looking statements" as the term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally written in the future tense and/or preceded by words such as "will," "expects," "anticipates," or other words that imply or predict a future state. Forward-looking statements include, but are not limited to, statements regarding absolute and relative product performance and features, Stratix^®10 FPGA competitive advantages and market expansion potential, future product availability, and the potential benefits that may be delivered through the pending acquisition of Altera by Intel. Investors are cautioned that all forward-looking statements in this release involve risks and uncertainty that can cause actual results to differ materially from those currently anticipated, due to a number of factors, including without limitation, the risk that the acquisition of Altera by Intel will not be completed, current global economic conditions, customer business environment, customer inventory levels, product availability, vertical market mix, market acceptance of the company's products, the performance of products once introduced, product introduction schedules, the rate of growth of the company's new products including Cyclone^® V, Cyclone IV, Arria^® 10, Arria V, Arria II, Stratix V, Stratix IV, MAX^® 10 FPGAs, MAX V CPLDs, HardCopy^®IV device families and Enpirion PowerSoCs, as well as changes in economic conditions and other risk factors discussed in documents filed by the company with the Securities and Exchange Commission (SEC) from time to time. Copies of Altera's SEC filings are posted on the company's website and are available from the company without charge. Forward-looking statements are made as of the date of this release, and, except as required by law, the company does not undertake an obligation to update its forward-looking statements to reflect future events or circumstances.

About Altera

Altera^® programmable solutions enable designers of electronic systems to rapidly and cost effectively innovate, differentiate and win in their markets. Altera offers FPGA, SoC, CPLD products, and complementary technologies, such as power solutions, to provide high-value solutions to customers worldwide. Visit www.altera.com.

ALTERA, ARRIA, CYCLONE, ENPIRION, MAX, MEGACORE, NIOS, QUARTUS and STRATIX words and logos are trademarks of Altera Corporation and registered in the U.S. Patent and Trademark Office and in other countries. All other words and logos identified as trademarks or service marks are the property of their respective holders as described at www.altera.com/legal.

INVESTOR CONTACT		MEDIA CONTACT
Scott Wylie - Vice President		Sue Martenson - Senior Manager
Investor Relations		Public Relations
(408) 544-6996		(408) 544-8158
swylie@altera.com		newsroom@altera.com

ALTERA CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended									Six Months Ended
(In thousands, except per share amounts)	June 26, 2015			March 27, 2015			June 27, 2014			June 26, 2015			June 27, 2014

Net sales	$	414,162		$	435,485		$	491,517		$	849,647		$	952,609
Cost of sales	126,590			156,263			162,391			282,853			314,259
Gross margin	287,572			279,222			329,126			566,794			638,350
Operating expense
Research and development expense	105,345			103,231			101,121			208,576			198,778
Selling, general, and administrative expense	75,011			70,506			78,974			145,517			153,481
Amortization of acquisition-related intangible assets	2,427			2,464			2,464			4,891			4,929
Merger expenses	18,458			—			—			18,458			—
Total operating expense	201,241			176,201			182,559			377,442			357,188
Operating margin ⁽²⁾	86,331			103,021			146,567			189,352			281,162
Compensation expense — deferred compensation plan	2,732			27			3,126			2,759			4,580
Gain on deferred compensation plan securities	(2,732)			(27)			(3,126)			(2,759)			(4,580)
Interest income and other	(8,495)			(6,596)			(7,819)			(15,091)			(13,804)
Gain reclassified from other comprehensive income	(1,463)			(2,506)			(43)			(3,969)			(91)
Interest expense	10,859			10,408			10,877			21,267			21,365
Income before income taxes	85,430			101,715			143,552			187,145			273,692
Income tax expense	15,091			6,863			16,548			21,954			30,174
Net income	70,339			94,852			127,004			165,191			243,518

Other comprehensive (loss)/income:
Unrealized (loss)/gain on investments:
Unrealized holding (loss)/gain on investments arising during period, net of tax of ($460), $41, $23, ($419) and $46	(24,805)			16,785			14,471			(8,020)			27,031
Less: Reclassification adjustments for gain on investments included in net income, net of tax of $9, $6, $6, $15 and $10	(1,454)			(2,500)			(37)			(3,954)			(81)
Other comprehensive (loss)/income	(26,259)			14,285			14,434			(11,974)			26,950
Comprehensive income	$	44,080		$	109,137		$	141,438		$	153,217		$	270,468

Net income per share:
Basic	$	0.23		$	0.31		$	0.41		$	0.55		$	0.78
Diluted	$	0.23		$	0.31		$	0.41		$	0.54		$	0.77

Shares used in computing per share amounts:
Basic	301,799			301,308			311,000			301,561			313,713
Diluted	304,604			303,285			313,513			303,951			316,145

Dividends per common share	$	0.18		$	0.18		$	0.15		$	0.36		$	0.30

Tax rate	17.7		%	6.7		%	11.5		%	11.7		%	11.0		%
% of Net sales:
Gross margin	69.4		%	64.1		%	67.0		%	66.7		%	67.0		%
Research and development ⁽¹⁾	26.0		%	24.3		%	21.1		%	25.1		%	21.4		%
Selling, general, and administrative	18.1		%	16.2		%	16.1		%	17.1		%	16.1		%
Operating margin ⁽²⁾	20.8		%	23.7		%	29.8		%	22.3		%	29.5		%
Net income	17.0		%	21.8		%	25.8		%	19.4		%	25.6		%


Notes:
(1) Research and development expense as a percentage of Net sales includes amortization of acquisition-related intangible assets.

(2) We define operating margin as gross margin less research and development expense, selling, general and administrative expense, amortization of acquisition-related intangible assets, and merger expenses, as presented above. This presentation differs from income from operations as defined by U.S. Generally Accepted Accounting Principles ("GAAP"), as it excludes the effect of compensation associated with the deferred compensation plan obligations. Since the effect of compensation associated with our deferred compensation plan obligations is offset by losses/(gains) from related securities, we believe this presentation provides a more meaningful representation of our ongoing operating performance. A reconciliation of operating margin to income from operations follows:

	Three Months Ended						Six Months Ended
(In thousands, except per share amounts)	June 26, 2015		March 27, 2015		June 27, 2014		June 26, 2015		June 27, 2014
Operating margin (non-GAAP)	$	86,331	$	103,021	$	146,567	$	189,352	$	281,162
Compensation expense — deferred compensation plan	2,732		27		3,126		2,759		4,580
Income from operations (GAAP)	$	83,599	$	102,994	$	143,441	$	186,593	$	276,582

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