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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 June 30, 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)
Delaware 77-0016691
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 Innovation Drive, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 544-7000
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 August 4, 1997: 88,734,689
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ALTERA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1997
PART I
FINANCIAL INFORMATION AND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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ALTERA CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, Dec.31,
1997 1996
-------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 66,467 $ 70,788
Short-term investments 306,959 210,062
--------- ---------
Total cash, cash equivalents, and
short-term investments 373,426 280,850
Accounts receivable, less allowance
for doubtful accounts of $2,765 and $2,399 57,992 68,486
Inventories 71,988 75,798
Deferred income taxes 58,402 45,402
Other current assets 17,999 2,451
--------- ---------
Total current assets 579,807 472,987
Property and equipment, net 130,336 89,804
Investments and other assets 204,915 215,421
-------- --------
$915,058 $778,212
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,115 $ 13,279
Accrued liabilities 127,113 89,209
Obligations 56,160 56,160
Accrued compensation 13,110 14,136
Income taxes payable -- 5,183
-------- --------
Total current liabilities 223,498 177,967
Convertible notes 230,000 230,000
-------- --------
Total liabilities 453,498 407,967
-------- --------
Stockholders' equity:
Common stock; $0.001 par value: 400,000
shares authorized, 88,540 and 87,604
shares issued and outstanding 89 88
Additional paid-in capital 108,085 90,556
Retained earnings 353,386 279,601
-------- --------
Total stockholders' equity 461,560 370,245
-------- --------
$915,058 $778,212
======== ========
See accompanying notes to financial information
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ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
Sales $164,115 $116,295 $306,554 $253,393
-------- -------- -------- --------
Costs and expenses:
Cost of sales 61,243 44,849 115,337 97,903
Research and development 14,439 11,343 26,754 23,866
Selling, general, and administrative 29,500 22,574 54,260 45,894
-------- -------- -------- --------
Total costs and expenses 105,182 78,766 196,351 167,663
-------- -------- -------- --------
Operating income 58,933 37,529 110,203 85,730
Interest and other income, net 1,262 387 1,591 1,310
-------- -------- -------- --------
Income before taxes 60,195 37,916 111,794 87,040
Provision for income taxes 20,466 13,651 38,009 31,335
-------- -------- -------- --------
Net income $ 39,729 $ 24,265 $73,785 $55,705
======== ======== ======== ========
Income per share:
Primary $ 0.42 $ 0.27 $ 0.79 $ 0.61
======== ======== ======== ========
Fully diluted $ 0.40 $ 0.26 $ 0.75 $ 0.59
======== ======== ======== ========
Shares and equivalents used in calculation
of income per share:
Primary 93,625 91,548 93,388 91,778
======== ======== ======== ========
Fully diluted 102,655 100,538 102,573 100,746
======== ======== ======== ========
See accompanying notes to financial information
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ALTERA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(Unaudited)
SIX MONTHS ENDED
----------------
June 30, June 30,
1997 1996
-------- --------
Cash flows from operating activities:
Net income $ 73,785 $ 55,705
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,760 9,691
Deferred income taxes (13,000) (6,501)
Changes in assets and liabilities:
Accounts receivable, net 10,494 14,470
Inventories 3,810 (45,703)
Other current and non-current assets (8,828) 2,260
Accounts payable 13,836 4,406
Accrued liabilities 37,904 12,827
Accrued compensation (1,026) (5,276)
Income taxes payable (5,183) (3,316)
--------- ---------
Cash provided by operating activities 124,552 38,563
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (48,818) (15,841)
Net change in short-term investments (96,897) 98,526
Long-term investments (688) (44,120)
--------- ---------
Cash provided by (used for) investing activities (146,403) 38,565
--------- ---------
Cash flows from financing activities:
Tax benefit from employee stock dispositions 9,530 -
Net proceeds from issuance of common stock 8,000 4,650
Payment on notes payable - (57,120)
--------- ---------
Cash provided by (used for) financing activities 17,530 (52,470)
--------- ---------
Net increase (decrease) in cash and cash equivalents (4,321) 24,658
Cash and cash equivalents at beginning of period 70,788 79,409
--------- ---------
Cash and cash equivalents at end of period $ 66,467 $ 104,067
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 54,795 $ 39,000
Cash paid during the period for interest $ 6,613 $ 6,613
See accompanying notes to financial information
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ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION
(Unaudited)
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.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
Note 2 - Balance Sheet Detail:
(In thousands)
June 30, Dec. 31,
1997 1996
--------- ---------
Inventories:
Purchased parts and raw materials $ 1,495 $ 1,773
Work-in-process 47,098 56,870
Finished goods 23,395 17,155
--------- ---------
$ 71,988 $ 75,798
========= =========
Property and equipment:
Land $ 19,925 19,925
Building 66,504 32,955
Equipment 84,924 75,453
Office furniture and equipment 12,548 9,508
Leasehold improvements 3,517 3,493
--------- ---------
187,418 141,334
Accumulated depreciation and
amortization (57,082) (51,530)
--------- ---------
$ 130,336 $ 89,804
========= =========
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.
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ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION (continued)
(Unaudited)
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:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
Basic Net Income Per Share:
Net income $ 39,729 $ 24,265 $ 73,785 $ 55,705
======== ======== ======== ========
Weighted average common shares
outstanding 88,340 87,412 88,106 87,334
======== ======== ======== ========
Basic Net Income Per Share $ 0.45 $ 0.28 $ 0.84 $ 0.64
======== ======== ======== ========
Diluted Net Income Per Share:
Net income $ 39,729 $ 24,265 $ 73,785 $ 55,705
Convertible subordinated notes interest,
net of income taxes and capitalized
interest 1,455 1,896 3,079 3,816
-------- -------- -------- --------
$ 41,184 $ 26,161 $ 76,864 $ 59,521
======== ======== ======== ========
Weighted average common shares
outstanding 88,340 87,412 88,106 87,334
Dilutive stock options 5,285 4,136 5,282 4,422
Assumed conversions of subordinated note 8,990 8,990 8,990 8,990
-------- -------- -------- --------
102,615 100,538 102,378 100,746
======== ======== ======== ========
Diluted Net Income Per Share $ 0.40 $ 0.26 $ 0.75 $ 0.59
======== ======== ======== ========
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ALTERA CORPORATION
NOTES TO FINANCIAL INFORMATION (continued)
(Unaudited)
Note 5 - Stockholders' Equity:
Effective June 19, 1997, Altera Corporation reincorporated as a Delaware
corporation with authorized capital of 400,000,000 shares of Common Stock,
$0.001 par value.
Note 6 - New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130 "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a financial
statement that is displayed with the same prominence as other financial
statements for periods beginning after December 15, 1997. Comprehensive income,
as defined, includes all changes in equity (net assets) during a period from
nonowner sources. Examples of items to be included in comprehensive income which
are excluded from net income include cumulative translation adjustments
resulting from consolidation of foreign subsidiaries' financial statements and
unrealized gains and losses on available-for-sale securities. Reclassification
of financial statements for earlier periods for comparative purposes is
required. The Company will adopt SFAS No. 130 beginning in 1998 and does not
expect such adoption to have a material effect on the consolidated financial
statements.
In June 1997, the FASB issued SFAS No. 131 (FAS 131) "Disclosures about Segments
of an Enterprise and Related Information." This statement establishes standards
for the way companies report information about operating segments in annual
financial statements for periods beginning after December 15, 1997. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. The company will adopt SFAS 131 beginning
in 1998 and does not expect such adoption to have a material effect on the
consolidated financial statements.
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ALTERA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales. Second quarter 1997 sales of $164.1 million were 41.1% higher
than the $116.3 million reported for the same period last year, and were up
15.2% from the first quarter 1997 sales of $142.4 million. Sales were higher
than the second quarter of 1996 primarily as a result of significantly higher
sales of the Company's MAX 7000, FLEX 10K and FLEX 8000 product families, which
were partially offset by reduced sales in the more mature MAX 5000 product
family. As compared to the first quarter of 1997, sales of virtually all of the
Company's product families increased or remained at the same level. The most
significant increases in sales from the first to second quarter of 1997 were
achieved in the MAX 7000, FLEX 10K and FLEX 8000 product families.
Geographically, the increase in sales from the first to the second quarter in
1997 was primarily driven by North America and Europe. Japan sales declined
approximately 2.7%, whereas Asia Pacific had a slight increase. Sales were
higher than the second quarter of 1996 for North America, Europe, Asia Pacific,
and Japan.
A significant portion of second quarter shipments was also ordered in
the second 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 products to market quickly.
However, this high percentage of turns bookings limits the Company's ability to
forecast sales levels in future quarters, including the current quarter.
Historically, the third quarter has demonstrated seasonally slower sales growth
and management expects, at this point, for that trend to continue in the current
quarter. Third quarter revenues may also be affected by recently announced book
price reductions in the MAX 7000 and FLEX 10K product families. Management
believes that these reduced prices may result in increased demand and strengthen
the Company's market share over the long term. However, reduced prices may
negatively affect the Company's short-term revenue growth, and there can be no
assurance that increased demand and market share will be achieved in the longer
term. Additionally, new product introductions from competitors may also cause
pricing pressures which could affect revenue growth.
During the second quarter of 1997, the Company's inventories on hand
increased from $62.0 million at March 31, 1997 to $72.0 million at June 30,
1997. The build up of inventory is intended to reduce lead times in newer
product families and support potential growth in overall sales. The Company is
continuing to build inventory in the current quarter.
Gross Margin. The gross margin percentage in the second quarter of
62.7% was up from 62.0% during the prior quarter, and 61.4% in the same period a
year ago. Gross margins increased, despite lower
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selling prices, as a result of lower manufacturing costs due to improved yields,
process advancements, increased manufacturing activity and lower wafer costs.
Although yields measured as a total for all product families improved
for the first six months, yields for the FLEX 10K product family actually
decreased in the second quarter. 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
$14.4 million for the quarter ended June 30, 1997, or $2.1 million higher than
the prior quarter, and $3.1 million higher than 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 8.8% for the second quarter of 1997, compared to
9.8% for the same quarter in 1996 and 8.6% for the first quarter of 1997.
Historically, the level of research and development expenditures as a percentage
of sales has fluctuated in part due to the timing of the purchase of masks and
wafers used in development and prototyping of new products. The Company
currently expects that, in the long term, research and development expenses will
continue to increase in absolute dollars but may fluctuate as a percentage of
sales.
The Company expects to continue to make significant investments in
prototyping of the FLEX 6000 and FLEX 10K product families. Also, the Company is
focusing its 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. Second quarter selling, general,
and administrative expenses of $29.5 million are $6.9 million higher than the
same quarter a year ago, and $4.7 million higher than the
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prior quarter. A significant portion of the increase in the second quarter of
1997 from the prior quarter was the result of additional legal accruals for
litigation costs related to the patent suits with Xilinx. In addition, increases
as compared to the prior quarters are also 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.
Operating Income. Second quarter 1997 operating income of $58.9
million, representing 35.9% of sales, was lower than the 36.0% achieved during
the first quarter of 1997 and higher than the 32.3% for the same quarter a year
ago. The year-to-year increase in operating income as a percentage of revenue
basis was affected by the increase in the Company's gross margin and the
decreases in R&D and SG&A expenses.
Interest and Other Income. Interest and other income increased compared
to the first quarter of 1997 and the same quarter a year ago. Interest and other
income consists of interest income on cash balances available for investment
offset by interest expense related to the Convertible Subordinated Notes (such
interest expense is net of capitalized interest incurred during the construction
of the new headquarters). The increase in interest and other income from the
first quarter of 1997 to the second quarter of 1997 is a result of increased
cash balances available for investment as well as increased capitalization of
interest expenses.
Income Taxes. The Company's provision for income taxes was 34% for the
second quarter of 1997 compared to 36% for the quarter ended June 30, 1996. The
decrease in the income tax rate is due in part to increased research and
development credits and tax-exempt interest income in 1997 compared to 1996.
Future Results. Future operating results will 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
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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 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 $92.5 million in the first six months of 1997, from $280.9 million
at December 31, 1996 to $373.4 million at June 30, 1997. The increase is mainly
attributable to net income of $73.8 million, adjusted by non-cash items
including depreciation and amortization of $12.8 million, and increases in
accounts payable and accrued liabilities totaling $51.7 million. Additional
sources were decreases in accounts receivable and inventory, and the issuance of
common stock to employees, totaling $22.3 million. Offsetting these sources of
cash was primarily an increase in fixed assets of $48.8 million and an increase
of $13.0 million in deferred income taxes during the first six months.
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During the first six months ended June 30, 1997, the Company invested
$48.8 million in property and equipment, primarily consisting of computer and
test equipment (approximately $9.8 million) and the construction of the new
corporate headquarters (approximately $36.6 million). In addition, during the
fourth quarter of 1997, the Company will be completing its investment in
WaferTech, L.L.C. in the amount of $56.2 million.
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 investment in
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, the Company's ability to achieve and maintain
appropriate inventory levels and respond successfully to changes in product
demand, the ability of price reductions to increase demand and strengthen the
Company's market share over the long term, 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.
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ALTERA CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1997
PART II
OTHER INFORMATION
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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. 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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 7,
1997 at 10:00 a.m., and was then adjourned to June 18, 1997 at 10:00 a.m. The
following matters were acted upon at the meeting:
BROKER
MATTER FOR VOTES VOTES WITHHELD/ NON-
ACTED UPON VOTES AGAINST ABSTENTIONS VOTES
---------- ----- ------- ----------- -----
1. Rodney Smith 78,879,539 1,079,787 0 0
Michael A. Ellison 79,758,231 201,095 0 0
Paul Newhagen 79,750,989 208,337 0 0
Robert W. Reed 79,859,349 99,977 0 0
William E. Terry 79,859,549 99,777 0 0
Deborah D. Triant 79,504,827 454,499 0 0
2. Approval of amendment of the 1996 51,427,609 28,366,898 164,819 0
Stock Option Plan to increase the
Common Stock available for issuance
from 4,000,000 to 5,300,000.
3. Reincorporation in Delaware and
Authorized Shares of Common Stock of
Delaware Corporation.
A. Approval of the re-incorporation 46,060,134 32,304,773 141,107 6,047,417
of the Company as a Delaware
Corporation.
B. Approval to set the number of 49,551,309 28,965,156 173,838 1,269,023
authorized shares of Common Stock
of the Delaware Corporation at
400,000,000.
4. Ratification of the appointment of 79,827,373 54,635 77,318 0
Price Waterhouse LLP as independent
accountants for the Company for the
fiscal year ending December 31, 1997.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation filed with the Delaware Secretary of State on March
25, 1997 (which became the Certificate of Incorporation of the Registrant on June
19, 1997).
3.2 By-laws of the Registrant as adopted May 5, 1997 (which became the By-laws of the
Registrant on June 19, 1997).
4.4 First Supplemental Indenture dated as of June 19, 1997 to Indenture dated as of
June 15, 1995.
10.50 Agreement and Plan of Merger dated June 18, 1997.
11.1 Computation of earnings per share.
27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
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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: August 13, 1997
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INDEX TO EXHIBITS
Exhibit
Number Exhibits
- -------- --------
3.1 Certificate of Incorporation filed with the Delaware Secretary of State on March
25, 1997 (which became the Certificate of Incorporation of the Registrant on June
19, 1997).
3.2 By-laws of the Registrant as adopted May 5, 1997 (which became the By-laws of the
Registrant on June 19, 1997).
4.4 First Supplemental Indenture dated as of June 19, 1997 to Indenture dated as of
June 15, 1995.
10.50 Agreement and Plan of Merger dated June 18, 1997.
11.1 Computation of earnings per share.
27. Financial Data Schedule.
19