<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997 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)
California 77-0016691
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2610 Orchard Parkway, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 894-7000
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 March 31, 1997: 88,139,736
<PAGE> 2
ALTERA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1997
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
2
<PAGE> 3
ALTERA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, Dec.31,
1997 1996
-------- --------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 67,035 $ 70,788
Short-term investments 295,736 210,062
-------- --------
Total cash, cash equivalents, and
short-term investments 362,771 280,850
Accounts receivable, less allowance
for doubtful accounts of $2,359 and $2,399 72,751 68,486
Inventories 62,029 75,798
Deferred income taxes 50,402 45,402
Other current assets 2,958 2,451
-------- --------
Total current assets 550,911 472,987
Property and equipment, net 109,069 89,804
Investments and other assets 213,872 215,421
-------- --------
$873,852 $778,212
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 24,102 $ 13,279
Accrued liabilities 121,121 89,209
Obligations 56,160 56,160
Accrued compensation 8,627 14,136
Income taxes payable 19,575 5,183
-------- -------
Total current liabilities 229,585 177,967
Convertible notes 230,000 230,000
-------- --------
Total liabilities 459,585 407,967
-------- --------
Shareholders' equity:
Common stock; no par value: 160,000
shares authorized, 88,140 and 87,604
shares issued and outstanding 100,610 90,644
Retained earnings 313,657 279,601
-------- --------
Total shareholders' equity 414,267 370,245
-------- --------
$873,852 $778,212
======== ========
</TABLE>
3
<PAGE> 4
ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1997 1996
-------- ---------
<S> <C> <C>
Sales $142,439 $137,098
-------- --------
Costs and expenses:
Cost of sales 54,094 53,054
Research and development 12,315 12,523
Selling, general, and administrative 24,760 23,320
-------- --------
Total costs and expenses 91,169 88,897
-------- --------
Operating income 51,270 48,201
Interest and other income, net 329 923
-------- --------
Income before taxes 51,599 49,124
Provision for income taxes 17,543 17,684
-------- --------
Net income $ 34,056 $ 31,440
======== ========
Income per share:
Primary $ 0.37 $ 0.34
======== ========
Fully diluted $ 0.35 $ 0.33
======== =========
Shares and equivalents used in calculation of income per share:
Primary 93,129 91,936
======== ========
Fully diluted 102,138 100,926
======== ========
</TABLE>
4
<PAGE> 5
ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
March 31, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 34,056 $ 31,440
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,317 4,603
Changes in assets and liabilities:
Accounts receivable, net (4,265) (5,844)
Inventories 13,769 (19,725)
Deferred income taxes (5,000) (6,000)
Other current and non-current assets (507) (111)
Accounts payable 10,823 6,990
Accrued liabilities 31,912 20,723
Accrued compensation (5,509) (7,903)
Income taxes payable 14,392 22,250
--------- ---------
Cash provided by operating activities 95,988 46,423
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (23,345) (6,228)
Net change in short-term investments (85,674) 38,623
Long-term investments (688) (2,000)
--------- ---------
Cash provided by (used for) investing activities (109,707) 30,395
--------- ---------
Cash flows from financing activities:
Tax benefit from employee stock dispositions 5,000 --
Net proceeds from issuance of common stock 4,966 3,372
Payment on notes payable -- (57,120)
--------- ---------
Cash provided by (used for) financing activities 9,966 (53,748)
--------- ---------
Net increase (decrease) in cash and cash (3,753) 23,070
equivalents
Cash and cash equivalents at beginning of period 70,788 79,409
--------- ---------
Cash and cash equivalents at end of period $ 67,035 $ 102,479
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 2,820 $ 1,320
</TABLE>
5
<PAGE> 6
ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION
Note 1 - Interim Statements:
In the opinion of the Company, the accompanying unaudited financial data contain
all adjustments, consisting only of normal, recurring adjustments, necessary to
present fairly the financial information included therein. This financial data
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report to Shareholders for the year
ended December 31, 1996. Results for the interim period presented are not
necessarily indicative of results for the entire year.
Note 2 - Balance Sheet Detail:
<TABLE>
<CAPTION>
(In thousands)
March 31, Dec. 31,
1997 1996
---------- ---------
(Unaudited)
<S> <C> <C>
Inventories:
Purchased parts and raw materials $ 1,164 $ 1,773
Work-in-process 46,927 56,870
Finished goods 13,938 17,155
---------- ---------
$ 62,029 $ 75,798
========== ==========
Property and equipment:
Land $ 19,925 $ 19,925
Building 51,644 32,955
Equipment 79,673 75,453
Office furniture and equipment 9,831 9,508
Leasehold improvements 3,517 3,493
---------- ---------
164,590 141,334
Accumulated depreciation and
amortization (55,521) (51,530)
---------- ---------
$ 109,069 $ 89,804
========== =========
</TABLE>
Note 3 - Income Per Share:
Primary income per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Dilutive
common equivalent shares consist of the assumed net shares issuable upon the
exercise of dilutive stock options using the treasury stock method. The
convertible subordinated notes issued in June 1995 are not common stock
equivalents and, therefore, have been excluded from the computation of primary
earnings per share.
Fully diluted net income per share assumes the conversion of the convertible
subordinated notes into shares of common stock, the elimination of the related
interest requirements, net of income taxes, and the dilutive effect of the stock
options.
6
<PAGE> 7
ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION (continued)
Note 4 - Pro Forma Net Income Per Share:
The Company computes its net income per share as stated in Note 3 in accordance
with provisions of the Accounting Principles Board's Opinion No. 15 (APB 15),
"Earnings per Share". In February 1997, the Financial Accounting Standards Board
released FAS 128, "Earnings per Share". The new standard supersedes APB 15 and
is effective for fiscal years beginning after December 15, 1997.
Under FAS 128, primary and fully diluted net income per share will be replaced
by basic and diluted net income per share. Basic net income per share is
computed based only on the weighted average number of common shares outstanding
during the period and does not give effect to the dilutive effect of common
equivalent shares, such as stock options. Diluted net income per share is
computed in the same manner as fully diluted net income per share, except that
the dilutive effect of the stock options is always based on the average market
price of the stock during the period, not the higher of the average and the
period end market price as required under APB 15.
Had the Company computed its net income per share based on FAS 128, the pro
forma amounts for basic and diluted net income per share would have been as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Basic Net Income Per Share:
- ---------------------------
Net income $ 34,056 $ 31,440
======== ========
Weighted average shares 87,873 87,258
======== ========
Basic Net Income Per Share $ 0.39 $ 0.36
======== ========
Diluted Net Income Per Share:
- -----------------------------
Net income $ 34,056 $ 31,440
Convertible subordinated notes interest,
net of income taxes 1,624 1,920
-------- --------
$ 35,680 $ 33,360
======== ========
Common shares outstanding 87,873 87,258
Dilutive stock options 5,256 4,678
Assumed conversions of subordinated notes 8,990 8,990
-------- --------
102,119 100,926
======== ========
Diluted Net Income Per Share $ 0.35 $ 0.33
======== ========
</TABLE>
7
<PAGE> 8
ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION (continued)
Note 5 - Subsequent Event:
At the Annual Meeting of Shareholders on May 7, 1997, the shareholders approved
to increase the number of shares of common stock reserved for issuance under the
1996 Stock Option Plan from 4,000,000 to 5,300,000 shares.
8
<PAGE> 9
ALTERA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales. First quarter 1997 sales of $142.4 million were 4% higher than
the $137.1 million reported for the same period last year, and were up 12% from
the fourth quarter 1996 sales of $127.2 million. Sales were higher than the
first quarter of 1996 primarily as a result of significantly higher sales of the
Company's MAX 7000 and FLEX 10K product families, partially offset by reduced
sales in the FLEX 8000 product family and the more mature MAX 5000 product
family. Compared to the fourth quarter of 1996, sales of virtually all of the
Company's product families increased or remained at the same level. The most
significant increases in sales were achieved in the MAX 7000, FLEX 8000 and FLEX
10K product families. Geographically, from the first quarter of 1996 to the
first quarter of 1997, there was no significant change in the relative levels of
sales. When comparing the first quarter of 1997 to the fourth quarter of 1996,
the total increase in sales was mainly attributable to North American and
European sales.
Over fifty percent of first quarter 1997 shipments were also ordered in
the first quarter (turns orders). Management expects that this relatively high
percentage of turns orders will persist and that it is consistent with the
Company's objective of helping customers bring new product to market quickly.
However, this high percentage of turns bookings limits the Company's visibility
of sales levels in future quarters, including the current quarter. While backlog
levels and early indicators in the second quarter of 1997 suggest another
quarter of sequential sales growth, visibility into the third quarter is quite
limited. Historically, the third quarter has demonstrated seasonally slow sales
volumes and management expects, at this point, for that trend to continue.
Historically, semiconductor prices decline as products mature. New
product introductions from competitors may also cause pricing pressures.
Management believes that reduced prices may result in increased demand and
strengthen the Company's market share over the long term. However, reduced
prices will negatively affect the Company's short-term sales growth and there
can be no assurance that increased demand and market share will be achieved in
the longer term. During 1996, the Company significantly reduced the book prices
of the FLEX 10K product family in order to generate customer acceptance of this
product, and to stimulate selling activity. As a result, unit volume sales of
this product family increased during the end of 1996 and during the first
quarter of 1997. Although overall dollar sales of these products increased as
well, the percentage increase in sales measured in dollars was not commensurate
with the percentage increase in sales measured by unit volume. The Company has
taken actions to reduce the manufacturing costs of this product family to
preserve margins, however, there can be no assurance that the FLEX 10K product
family, or other new products will be successful in securing
9
<PAGE> 10
broad market acceptance or maintaining higher margins, or that the average
selling price decline on other product families will not accelerate.
During the first quarter of 1997, the Company's inventories on hand
continued to decrease from $75.8 million at December 31, 1996 to $62.0 million
at March 31, 1997. The decrease in inventories resulted from higher than
anticipated resales and a restocking of product at the Company's distributors.
While lead times for most of the Company's products are within three weeks,
inventory levels are below targets established by management, and for certain of
the Company's products, lead times are in excess of one month. Long lead times
and limited product availability will discourage the Company's customers from
designing with the Company's products and impair long-term sales. In order to
help reduce lead times, despite volatile end market demand, management is
endeavoring to increase inventories. Management expects a modest increase in
inventories in the second quarter and a more significant increase in the third
quarter, however, there can be no assurance that management will be able to
achieve this goal.
Gross Margin. The gross margin percentage in the first quarter of 62.0%
was up from 61.5% during the prior quarter, and 61.3% in the same period a year
ago. Gross margins increased, despite lower selling prices, as a result of lower
manufacturing costs due to improved yields, process advancements, increased
manufacturing activity and lower wafer costs.
Although yields improved in the first quarter of 1997 as compared to
the prior year, there can be no assurances that recently achieved yield
improvements will continue or that yields will not deteriorate. The Company
continues to spend significant research and development resources to improve
production yields on both new and established products. Difficulties in
production yields often occur in the fabrication processes when the Company is
beginning production of new products. These difficulties can potentially result
in significantly higher costs and lower product availability. 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 the Company's wafer suppliers and the Company may
experience delays from time to time in processing some of its products which
also may result in higher costs and lower product availability. In addition,
gross margins may be negatively affected by lower manufacturing volumes which
result in manufacturing inefficiencies.
Research and Development. Research and development expenditures were
$12.3 million for the quarter ended March 31, 1997, which was approximately
equal to the prior quarter and the same period a year ago. The research and
development expenditures include expenditures for headcount, prototype and
pre-production costs, development of process technology, development of software
to support new products and design environments, and development of new
packages. As a percentage of sales, the research and development expenditures
were 8.6% for the first
10
<PAGE> 11
quarter of 1997, compared to 9.1% for the same quarter in 1996 and 9.7% for the
fourth quarter of 1996. Historically, the level of research and development
expenditures as a percentage of sales has fluctuated due to the timing of the
purchase of masks and wafers used in development and prototyping of new
products.
The Company expects to continue to make significant investments in
research and development and is focusing its research and development efforts on
the development of programmable logic chips, related development software and
hardware, and advanced semiconductor wafer fabrication processes. However, even
if the Company accomplishes its goals for the development of new products and
manufacturing processes, there is no assurance that these products will achieve
market acceptance, that the new manufacturing processes will be successful, or
that the suppliers will provide the Company with the quality or quantity of
wafers and materials that the Company requires. The Company must continue to
develop and introduce new products in a timely manner to help counter the
industry's historical trend of prices declining as products mature.
Selling, General, and Administrative. First quarter selling, general,
and administrative expenses of $24.8 million are $1.5 million higher than the
same quarter a year ago, and $3.5 million higher than the prior quarter. The
increases as compared to the prior quarters are mainly attributable to higher
marketing and field sales headcount, increases in advertising and promotional
expenditures, and higher commissions due to increased sales. Selling, general,
and administrative expenses include commission and incentive expenses,
advertising and promotional expenditures, legal, and salary expenses related to
field sales, marketing, and administrative personnel.
The Company uses three methods to market its products: sales through
licensed domestic and foreign distributors, direct sales to electronics
manufacturers via independent sales representatives, and direct sales to
customers by Altera sales department personnel. The Company has approximately
twenty field sales offices. Approximately 85% percent of the Company's current
worldwide sales are made through distributors.
Operating Income. First quarter 1997 operating income of $51.3 million,
representing 36.0% of sales, was higher than the 35.1% achieved during the first
quarter of 1996 and the 35.2% for the most recent prior quarter. The increase in
operating income on a percentage of revenue basis is mainly attributed to an
increase in the Company's gross margin.
Interest and Other Income. Interest and other income increased compared
to the fourth quarter of 1996, but decreased as compared to the first quarter of
1996. Interest and other income consists of interest income on cash balances
available for investment and interest expense related to the Convertible
Subordinated Notes, net of capitalized interest incurred during the construction
11
<PAGE> 12
of the new headquarters. The increase in interest and other income from the
fourth quarter of 1996 to the first quarter of 1997 is a result of increased
cash balances available for investment and increased capitalized interest. The
Company will continue to capitalize interest until the completion of the new
corporate headquarters, currently scheduled for July 1997. The decrease in
interest and other income in the first quarter of 1997 as compared to the first
quarter of 1996 is a result of a change in the Company's investment strategy.
Subsequent to March 31, 1996, management started investing a larger portion of
the Company's investment portfolio in tax exempt, rather than taxable,
investments, which result in lower pre-tax yields.
Income Taxes. The Company's provision for income taxes was 34% for the
first quarter of 1997 compared to 36% for the quarter ended March 31, 1996. The
decrease in the income tax rate is primarily due to increased research and
development credits in the first quarter of 1997 compared to the first quarter
of 1996.
Future Results. Future operating results depend on the Company's
ability to develop, manufacture, and sell complicated semiconductor components
and complex software that offer customers greater value than products of
competing vendors. The Company's efforts in this regard may not be successful.
Also, a number of factors outside of the Company's control, including general
economic conditions and cycles in world markets, exchange rate fluctuations, or
a lack of growth in the Company's end markets could impact future results. The
Company is highly dependent upon subcontractors to manufacture silicon wafers
and perform assembly and testing services. Disruptions or adverse supply
conditions arising from market conditions, political strife, labor disruptions,
natural or man-made disasters, other factors, and normal process variations
could have a material adverse effect on the Company's future operating results.
Competitive break-throughs and particularly competitive pricing could also
impact future operating results. Additionally, litigation relating to
competitive patents and intellectual property could have an adverse impact on
the Company's financial condition or operating results.
The Company owns more than 100 United States patents and has additional
pending United States patent applications on its semiconductor products. The
Company also has technology licensing agreements with AMD, Cypress
Semiconductor, Intel, and Texas Instruments giving the Company royalty-free
rights to design, manufacture, and package products using certain patents they
control. Other companies have filed applications for, or have been issued, other
patents and may develop, or obtain proprietary rights relating to, products or
processes competitive with those of the Company. From time to time the Company
may find it desirable to obtain additional licenses from the holders of patents
relating to products or processes competitive with those of the Company.
Although its patents and patent applications may have value in discouraging
competitive entry into the Company's market segment and the Company believes
that its current licenses will assist it in developing additional products,
there can be no assurance that any additional patents will be granted to the
Company, that the Company's patents will
12
<PAGE> 13
provide meaningful protection from competition, or that any additional products
will be developed based on any of the licenses that the Company currently holds.
The Company believes that its future success will depend primarily upon the
technical competence and creative skills of its personnel, rather than on its
patents, licenses, or other proprietary rights.
The Company, in the normal course of business, from time-to-time
receives and makes inquiries with respect to possible patent infringements. As a
result of inquiries received from companies, it may be necessary or desirable
for the Company to obtain additional licenses relating to one or more of its
current or future products. There can be no assurance that such additional
licenses could be obtained, and, if obtainable, could be obtained on conditions
that would not have a material adverse effect on the Company's operating
results. If the inquiring companies were to allege infringement of their
patents, as is the case in the Company's current litigation with two of its
competitors, there can be no assurance that any necessary licenses could be
obtained, and, if obtainable, that such licenses would be on terms or conditions
that would not have a material adverse effect on the Company. In addition, if
litigation were initiated, there can be no assurance that these companies would
not succeed in obtaining significant monetary damages or an injunction against
the manufacture and sale of one or more of the Company's product families. It
may be necessary or desirable for the Company to incur significant litigation
expenses to enforce its intellectual property rights.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments
increased by $81.9 million in the first quarter of 1997, from $280.9 million at
December 31, 1996 to $362.8 million at March 31, 1997. The increase is mainly
attributable to net income of $34.1 million, adjusted by non-cash items
including depreciation and amortization of $6.3 million, and increases in
accounts payable, income taxes payable and accrued liabilities totaling $57.1
million. In addition, the Company received $5.0 million in cash from the
issuance of common stock to employees. Offsetting these sources of cash was
mainly an increase in fixed assets of $23.3 million during the quarter.
During the first quarter of 1997, the Company invested $23.3 million in
property and equipment, primarily consisting of computer and test equipment
(approximately $4.2 million) and the construction of the new corporate
headquarters (approximately $18.7 million). The Company expects to invest
approximately $50 million of additional capital in property and equipment during
the remainder of 1997, including approximately $30 million for the construction
of its corporate headquarters. In addition, during the fourth quarter of 1997,
the Company will be paying off its remaining obligation to WaferTech of $56.2
million.
13
<PAGE> 14
The Company believes that its cash, cash equivalents, and short-term
investments, combined with cash generated from ongoing operations, will be
adequate to finance the Company's operations, the remaining obligation to
WaferTech, and capital expenditures for at least the next year.
Impact of Currency and Inflation. The Company purchases the majority of
its materials and services in U.S. Dollars, and most of its foreign sales are
transacted in U.S. dollars. However, Altera does have Yen denominated purchase
contracts with Sharp Corporation of Japan for processed silicon wafers. In
recent years, the Company did not hold or purchase any foreign exchange
contracts for the purchase or sale of foreign currencies, but may choose to
enter into such contracts in the future should conditions appear favorable.
Effects of inflation on Altera's financial results have not been significant.
Safe Harbor Notice
This Report on Form 10-Q 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
preceded by words such as "expects," "suggests," "believes," "anticipates," or
"intends." The Company's 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 the Company's control. Some of these
risks and uncertainties are described in the section of this Report entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the Company's Annual Report on Form 10-K on file with the
Securities and Exchange Commission. Other factors that could cause actual
results to differ materially from projected results include but are not limited
to risks associated with the Company's dependence on third-party wafer
suppliers, the Company's ability to achieve continued cost reductions and
maintain gross margins, successful development of new products through
investment in research and development and application of new process
technologies to old and new product lines, recruitment and retention of
qualified personnel, market acceptance of and demand for the Company's products,
competition for and pressure on pricing of the Company's products, changes in
customer ordering patterns, litigation involving intellectual property rights,
issuance of new patents and acquisition of other intellectual property rights,
and general market conditions.
14
<PAGE> 15
ALTERA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
MARCH 31, 1997
PART II
OTHER INFORMATION
15
<PAGE> 16
ITEM 1. LEGAL PROCEEDINGS.
In June 1993, Xilinx, Inc. ("Xilinx") brought suit against the Company
seeking monetary damages and injunctive relief based on the Company's alleged
infringement of certain patents held by Xilinx. In June 1993, the Company
brought suit against Xilinx, seeking monetary damages and injunctive relief
based on Xilinx's alleged infringement of certain patents held by the Company.
In April 1995, the Company 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 the Company's patents. In May
1995, Xilinx counterclaimed against the Company in Delaware, asserting defenses
and seeking monetary damages and injunctive relief based on the Company's
alleged infringement of certain patents held by Xilinx. Subsequently, the
Delaware case has been transferred to California. The California litigation has
been the subject of court-ordered mediation, which to date has not resulted in
resolution of the litigation. Due to the nature of the litigation with Xilinx
and because the lawsuits are still in the pre-trial stage, the Company's
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. Management cannot ensure that Xilinx will not succeed in obtaining
significant monetary damages or an injunction against the manufacture and sale
of the Company's MAX 5000, MAX 7000, FLEX 8000, or MAX 9000 families of
products, or succeed in invalidating any of the Company's patents. Although no
assurances can be given as to the results of these cases, based on the present
status, management does not believe that such results will have a material
adverse effect on the Company's financial condition or results of operations.
In August 1994, Advanced Micro Devices ("AMD") brought suit against the
Company seeking monetary damages and injunctive relief based on the Company's
alleged infringement of certain patents held by AMD. In September, 1994 Altera
answered the complaint asserting that it is licensed to use the patents which
AMD claims are infringed and filed a counterclaim against AMD alleging
infringement of certain patents held by the Company. In a June 1996 trial
bifurcated from the infringement claims, the Company prevailed in its defense
that it is licensed under some or all of the patents asserted by AMD in the
suit. A second phase of the bifurcated licensing trial will determine the
specific AMD patents that are covered by the license. Due to the nature of the
litigation with AMD, and because the infringement portion of the lawsuit is
still in the pre-trial stage, the Company's 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. Management cannot ensure that AMD
will not succeed in obtaining significant monetary damages or an injunction
against the manufacture and sale of the Classic, MAX 5000, MAX 7000, FLEX 8000,
MAX 9000, FLEX 10K, and FLASHlogic product families, or succeed in invalidating
any of the Company's patents remaining in the suit. Although no assurances can
be given as to the results of this case, based on its present status, management
does not believe that any of such results will have a material adverse effect on
the Company's financial condition or results of operations.
16
<PAGE> 17
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of earnings per share
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
17
<PAGE> 18
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, Vice
President (duly
authorized officer),
and Chief Financial Officer
(principal financial officer)
Date: May 13, 1997
18
<PAGE> 19
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 11.1
ALTERA CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
March 31, March 31,
1997 1996
---------- ---------
<S> <C> <C>
PRIMARY:
Weighted average shares outstanding 87,873 87,258
Net effect of dilutive stock options 5,256 4,678
---------- ---------
Total 93,129 91,936
========== =========
Net income $ 34,056 $ 31,440
========== =========
Income per share $ 0.37 $ 0.34
========== =========
FULLY DILUTED:
Weighted average shares outstanding 87,873 87,258
Net effect of dilutive stock options 5,275 4,678
Assumed conversion of convertible
subordinated notes 8,990 8,990
----------- ---------
Total 102,138 100,926
=========== =========
Net income $ 34,056 $ 31,440
Add:
Convertible subordinated notes
interest, net of income taxes 1,624 1,920
----------- ---------
Adjusted net income $ 35,680 $ 33,360
========== ========
Income per share $ 0.35 $ 0.33
========== =========
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 67,035
<SECURITIES> 295,736
<RECEIVABLES> 72,751
<ALLOWANCES> 2,359
<INVENTORY> 62,029
<CURRENT-ASSETS> 550,911
<PP&E> 164,590
<DEPRECIATION> (55,521)
<TOTAL-ASSETS> 873,852
<CURRENT-LIABILITIES> 229,585
<BONDS> 230,000
0
0
<COMMON> 100,610
<OTHER-SE> 313,657
<TOTAL-LIABILITY-AND-EQUITY> 873,852
<SALES> 142,439
<TOTAL-REVENUES> 142,439
<CGS> 54,094
<TOTAL-COSTS> 54,094
<OTHER-EXPENSES> 37,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,637
<INCOME-PRETAX> 51,599
<INCOME-TAX> 17,543
<INCOME-CONTINUING> 34,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,056
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.35
</TABLE>
