ALTERA CORPORATION GAAP AND NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data and note) (Unaudited) THREE MONTHS ENDED ---------------------------------------------------- September 29 September 30 2006 2005 --------------------------------------- ------------ GAAP(2) Adjustments(1) Non-GAAP(2) GAAP(2) ------------ --------------------------------------- Net sales $ 341,213 $ - $ 341,213 $ 291,530 Cost of sales 110,527 (422) 110,105 97,647 ------------ -------------- ----------- ------------ Gross margin 230,686 422 231,108 193,883 ------------ -------------- ----------- ------------ Operating expenses: Research and development 63,604 (6,116) 57,488 49,443 Selling, general, and administrative 80,773 (8,483) 72,290 57,289 ------------ -------------- ----------- ------------ Total operating expenses 144,377 (14,599) 129,778 106,732 ------------ -------------- ----------- ------------ Income from operations 86,309 15,021 101,330 87,151 Interest and other income, net 16,539 - 16,539 11,368 ------------ -------------- ----------- ------------ Income before income taxes 102,848 15,021 117,869 98,519 Provision for income taxes 15,427 4,611 20,038 20,704 ------------ -------------- ----------- ------------ Net income $ 87,421 $ 10,410 $ 97,831 $ 77,815 ============ ============== =========== ============ Net income per share: Basic $ 0.24 $ 0.27 $ 0.21 ============ =========== ============ Diluted $ 0.24 $ 0.27 $ 0.21 ============ =========== ============ Shares used in computing per share amounts: Basic 361,840 361,840 372,690 ============ =========== ============ Diluted 367,313 367,313 379,080 ============ =========== ============ Tax rate 15.0% 17.0% 21.0% % of Net Sales: Gross margin 67.6% 67.7% 66.5% Research and development 18.6% 16.8% 17.0% Selling, general, and administrative 23.7% 21.2% 19.7% Income from operations 25.3% 29.7% 29.9% Net income 25.6% 28.7% 26.7% Notes: ----------------- (1) Adjustments consist of non-cash stock-based compensation expenses and related tax effects. (2) The GAAP and Non-GAAP income statements above include amounts related to our Nonqualified Deferred Compensation Plan (NQDC Plan). The NQDC Plan had gains of $2.1 million for the three month periods ended September 29, 2006 and September 30, 2005, respectively. Gains or (losses) were included in interest and other income, net, as well as operating expenses. There was no net impact in any period presented on income before income taxes or net income arising from this plan. THREE MONTHS ENDED --------------------------- NQDC Impact September 29 September 30 (In Millions) 2006 2005 -------------- ------------ -------------- Increase in R&D Expense $ 1.2 $ 0.7 Increase in SG&A Expense 0.9 1.4 ------------ -------------- Increase in Interest and other income, net $ 2.1 $ 2.1 ============ ==============