ALTERA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 28,

 2014

December 31,

 2013

March 29,

 2013

Net sales

$

461,092

$

454,367

$

410,501

Cost of sales

151,868

144,024

126,083

Gross margin

309,224

310,343

284,418

Operating expense

   Research and development expense

97,657

106,643

87,717

   Selling, general, and administrative expense

74,507

84,692

78,600

   Amortization of acquisition-related intangible assets

2,465

1,850

213

Total operating expense

174,629

193,185

166,530

Operating margin ⁽¹⁾

134,595

117,158

117,888

Compensation expense — deferred compensation plan

1,454

3,881

3,422

Gain on deferred compensation plan securities

(1,454)

(3,881)

(3,422)

Interest income and other

(5,985)

(4,902)

(1,659)

Gain reclassified from other comprehensive income

(48)

(24)

(54)

Interest expense

10,488

8,272

2,465

Income before income taxes

130,140

113,812

117,136

Income tax expense/(benefit)

13,626

14,878

(3,053)

Net income

98,934

120,189

Other comprehensive income/(loss):

Unrealized gain/(loss) on investments:

   Unrealized holding gain/(loss) on investments arising during period, net of tax of $24, ($11) and ($5)

12,560

(26,811)

(1)

   Less: Reclassification adjustments for gain on investments included in net income, net of tax of $4, $2 and $5

(44)

(22)

(49)

Other comprehensive income/(loss)

12,516

(26,833)

(50)

Comprehensive income

$

129,030

$

72,101

$

120,139

Net income per share:

   Basic

$

0.37

$

0.31

$

0.38

   Diluted

$

0.37

$

0.31

$

0.37

Shares used in computing per share amounts:

   Basic

316,552

319,993

319,867

   Diluted

318,901

322,018

323,021

Dividends per common share

$

0.15

$

0.15

$

0.10

Tax rate

10.5%

13.1%

(2.6)%

% of Net sales:

   Gross margin

67.1%

68.3%

69.3%

   Research and development ⁽¹⁾

21.7%

23.9%

21.4%

   Selling, general, and administrative

16.2%

18.6%

19.1%

   Operating margin ⁽²⁾

29.2%

25.8%

28.7%

   Net income

25.3%

21.8%

29.3%

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 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 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

(In thousands, except per share amounts)

March 28,

  2014

December 31,

 2013

March 29,

 2013

Operating margin (non-GAAP)

$

134,595

$

117,158

$

117,888

Compensation expense — deferred compensation plan

1,454

3,881

3,422

Income from operations (GAAP)

$

133,141

$

113,277

$

114,466