Altera Reports Third Quarter 1997 Results; Third Quarter Sales Increase 39% Annually Net Income Up 61% Annually

Business Wire, Oct 15, 1997

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 15, 1997--Altera Corporation (NASDAQ:ALTR) today reported that third quarter sales of $162.1 million were up 39% over the same period last year, and down 1% from the previous quarter.

Gross margin as a percentage of sales for the third quarter was 62.5%, up 1.1 percentage points over the same period last year and down 0.2 percentage points from the prior quarter. On a yearly basis, gross margin increased as a result of lower wafer prices and manufacturing process advancements. As compared to the prior quarter, gross margin declined due to price reductions which became effective July 1, 1997.

Net income for the third quarter was $38.8 million, up 61% over the third quarter of 1996 and down 2% from the previous quarter. Third quarter earnings per share, on a fully-diluted basis, were $0.40, an increase of $0.14 from the same period last year and flat from the prior quarter.

Altera added $37.4 million of cash to its balance sheet during the quarter, after expenditures of $8.3 million toward the construction of the new San Jose headquarters facility, and $14.3 million for routine capital expenditures.

Rodney Smith, President & CEO stated, "The financial results for the September quarter are consistent with the guidance announced on August 27, 1997. Domestic revenues declined sequentially, as expected. However, International revenues increased, and that is encouraging in light of the seasonal slowness which typically accompanies the summer quarter. The communications market segment continued to provide the largest component of our results, followed by the computing segment."

Mr. Smith concluded, "Revenues for new products were up from the prior quarter in spite of the price reductions and slow season. Furthermore, units for new products grew 52% sequentially and set a record at 1 million units purchased by customers."

Additionally, the Company announced that it will change its revenue recognition policy. The Company will defer revenue on shipments to distributors until the product is sold to the end customer, worldwide. This accounting change will involve a restatement of the current year's results consisting of two elements. The first element, a one-time charge of $15 to $20 million, representing the cumulative impact of the change in accounting principle as of January 1, 1997, will be included in Quarter 1, 1997 results. The second element will be a restatement of 1997 results to the new accounting basis, and this will slightly increase first half revenues and earnings (before the one-time charge). The impact to the third quarter results, as just reported, will not be material. The restated results will be disclosed along with the fourth quarter earnings release.

Forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward- looking statements involve risks and uncertainty, including without limitation risks of dependence on third-party wafer suppliers, intellectual property rights and litigation, market acceptance of and demand for the Company's products as well as general market conditions, competition and pricing, and development of technology and manufacturing capabilities. Please refer to the Company's Securities and Exchange Commission filings, copies of which are available from the Company without charge, for further information.

Fax on Demand:

Copies of Altera's announcement are available from its fax-on-demand service. In the U.S. and Canada to request a copy call 1-800-789-ALTR. International users can dial their local International Access Code followed by 1-408-894-0466. More information can be obtained on the world wide web at http://www.altera.com .

Altera Corporation, founded in 1983, is a world-wide leader in high-performance, high-density programmable logic devices and associated computer aided engineering (CAE) logic development tools. Programmable logic devices are semiconductor chips that offer on-site programmability to customers. The chips are programmed with tools that run on personal computers or engineering workstations. User benefits include ease of use, lower risk, and fast time-to-market. The Company offers the broadest line of CMOS programmable logic devices that address high-speed, high density, and lower power applications. Altera products serve a broad range of market areas, including telecommunications, data communications, computers, and industrial applications. Altera common stock is traded on The Nasdaq Stock Market using the symbol ALTR. -0-

                           ALTERA CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                   (Thousands, except per share data)
                              (Unaudited)


                       THREE MONTHS ENDED         NINE MONTHS ENDED

                   Sept. 30  Sept. 30  June 30   Sept. 30   Sept. 30
                      1997     1996      1997       1997       1996
Sales               $162,126 $116,728 $164,115   $468,680    $370,121

Costs & Expenses:
Cost of Sales         60,749   45,094   61,243    176,086     142,997
Research and
  Development         14,334   13,308   14,439     41,088      37,174
Selling, General &
  Administrative      29,163   20,590   29,500     83,423      66,484

Total Costs &
  Expenses           104,246   78,992  105,182    300,597     246,655

Income from
 Operations           57,880   37,736   58,933    168,083     123,466
Interest & Other
 Income, Net             925      (51)   1,262      2,516       1,259
Income before Taxes   58,805   37,685   60,195    170,599     124,725
Taxes                 19,994   13,567   20,466     58,003      44,902
Net Income         $  38,811 $ 24,118 $ 39,729   $112,596    $ 79,823

Net Income per Share:
   Primary         $    0.41 $   0.26 $   0.42   $   1.20    $   0.87
   Fully diluted   $    0.40 $   0.26 $   0.40   $   1.15    $   0.85

Weighted average shares & equivalents:
   Primary            94,078   91,150   93,625     93,620      91,588
   Fully diluted     103,068  100,610  102,655    102,674     100,606

Tax rate                  34%      36%      34%        34%        36%

% of Sales:

Gross Margin              63%       61%     63%        62%        61%
  Research and
   Development             9%       11%      9%         9%        10%
  Selling, General &
   Administrative         18%       18%     18%        18%        18%
  Income from Operations  36%       32%     36%        36%        33%
  Net Income              24%       21%     24%        24%        22%


                             ALTERA CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Thousands)
                                (Unaudited)

                                      Sept. 30            June 30
                                         1997               1997
Assets

Current assets:
  Cash and short-term investments   $  410,793         $  373,426
  Accounts receivable, net              49,259             57,992
  Inventories                           97,913             71,988
  Other assets                          71,316             76,401
Total current assets                   629,281            579,807
Property and equipment, net            148,468            130,336
Investments and intangibles            202,678            204,915

                                    $  980,427         $  915,058

Liabilities and Stockholders' Equity

Current liabilities                 $  238,549         $  223,498
Long-term debt                         230,000            230,000
Stockholders' equity                   511,878            461,560

                                    $  980,427         $  915,058

Key Ratios & Information

Current Assets/Current Liabilities         3:1                3:1
Liabilities/Equity                         1:1                1:1
Annualized Quarterly Return on Equity      32%                36%
Quarterly Depreciation Expense           4,431              4,206
Quarterly Capital Expenditures          22,563             25,473
Annualized Sales per Employee              625                669