ATI Reports 34 Per Cent Sequential Revenue Increase in First Quarter; Rapidly Expanding Position in Enthusiast, Mainstream and Value Markets.Business Editors/High-Tech Writers MARKHAM Markham City (pop., 1991: 154,000), southeastern Ontario. It is situated on the Rouge River, northeast of Toronto. Settled in 1794, the town was named for William Markham, archbishop of York. It annexed the nearby township of Markham in 1971. , Ontario--(BUSINESS WIRE)--Dec. 18, 2002 ATI Technologies “ATI” redirects here. For other uses, see Ati. ATI Technologies U.L.C. ATI is a major Canadian designer and supplier of graphics processing units, motherboard chipsets, and video display cards. Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ATYT ATYT ATI Technologies, Inc (stock symbol) ) (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :ATY ATY Air Textured Yarn (textile) ATY Watertown, SD, USA (Airport Code) ATY After-Tax Yield .TO), a world leader in the design and manufacture of innovative 3D graphics and digital media silicon solutions, today announced its financial results for the first quarter of its 2003 fiscal year ended November November: see month. 30, 2002. Revenues for the first quarter were $322.0 million, up 34.5 per cent from $239.5 million in the fourth quarter of fiscal 2002, and up 28.8 per cent from $250.0 million in the first quarter of fiscal 2002. Gross margins were 27.3 per cent, down from 30.1 per cent in the fourth quarter of fiscal 2002. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , excluding amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , increased to $79.6 million from $70.1 million in the previous quarter. Net income for the first quarter was $5.0 million or $0.02 per share compared to a net loss of $32.2 million or $0.14 per share for the fourth quarter of 2002 and a net loss of $10.3 million or $0.04 per share for the same period a year ago. Adjusted net income(1) for the quarter was $7.0 million or $0.03 per share compared to $2.4 million or $0.01 per share for the previous quarter, and $10.4 million or $0.04 per share for the same period a year ago. "We were pleased with the strength of our PC business in our first quarter," said David Orton Or·ton , Joe Full name John Kingsley Orton. 1933-1967. British playwright noted for his black comedies, including Entertaining Mr. Sloane (1964) and What the Butler Saw (1969). , President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , ATI Technologies Inc. "We obtained key design wins in every product category and our product strength helped ATI (ATI Technologies Inc., Markham Ontario, http://ati.amd.com) A leading manufacturer of graphics chips and display adapters. Founded in 1985 by K. Y. Ho, Benny Lau and Lee Lau, ATI chips and boards are widely used by OEMs. to gain share in all major channels and geographies. We continue to invest in R&D in order to maintain the momentum that we have created." In the first quarter, the RADEON See ATI. (TM) 9700 and RADEON(TM) 9000 family of products along with ATI's integrated graphics Refers to having the video display circuitry of a computer contained directly on the motherboard rather than on a separate plug-in card (the display adapter). Integrated graphics typically share memory with the CPU (see shared video memory) and provide a more economical alternative to the products, drove revenue growth. ATI's add-in-board partners delivering RADEON(TM)-based technology to the system builder  This article's grammar usage needs improvement. Please edit this article in accordance with Wikipedia's . market also
contributed to the Company's revenue growth this quarter."Over the last few quarters, ATI has achieved undisputed technology leadership in PC graphics, and delivered compelling visual solutions to every market segment," said K.Y. Ho, Chairman and Chief Executive Officer, ATI Technologies Inc. "Moreover, ATI is committed to executing on an aggressive product roadmap A roadmap may refer to:
Outlook Because of the seasonal strength in the first quarter, ATI believes that revenues in the second quarter will be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10 per cent lower than the first quarter. During the second quarter, gross margins as a per cent of revenues should improve somewhat, while total operating expenses are expected to increase primarily due to research and development costs related to higher prototyping (1) Creating a demo of a new system. Prototyping is essential for clarifying information requirements. The design of a system (functional specs) must be finalized before the system can be built. expenses. Based on these factors, the Company is targeting to achieve second quarter adjusted net income that is approximately the same as the first quarter. "Looking into the back half of the year, we are focusing on improving margins in our PC business and realizing a contribution from our consumer business, where a soft market has delayed the start of some of our customers' programs," said Terry Nickerson, Senior Vice President and Chief Financial Officer, ATI Technologies Inc. "Our challenge is to translate (1) To change one language into another; for example, assemblers, compilers and interpreters translate source language into machine language. (2) In computer graphics, to move an image on screen without rotating it. our product strength and top-line success into equal success on our bottom line." Operational Highlights During the first quarter, ATI enjoyed rapid adoption of the RADEON(TM) 9700 and RADEON(TM) 9000 family of products by the OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and , system builder and retail channels. The RADEON(TM) 9700 and RADEON(TM) 9700 PRO began shipping in the flagship models of the major OEMs worldwide including Dell, eMachines (eMachines, Inc., Irvine, CA, www.emachines.com) A manufacturer of PCs founded in 1998 and backed by Korean PC manufacturer TriGem Computer, monitor maker Korea Data Systems and other investors. eMachines targeted the consumer market with its first models in the sub-$500 range. , Fujitsu (company) Fujitsu - A Japanese elecronics corporation. Fujitsu owns ICL, Amdahl Corporation, and DMR. Home USA, Japan. , Founder, Gateway, HP and NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98). NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. . ATI continued to maintain a strong position in the notebook market during the quarter with more than 20 design wins for the MOBILITY(TM) RADEON(TM) 9000. Major design wins included models from Dell, HP and Apple. Other operational highlights during the quarter: -- The RADEON(TM) 9000 PRO began shipping in consumer desktop PCs from major OEMs including Apple, Fujitsu Siemens, HP and NEC. -- ATI set a new standard for the performance mainstream desktop market with the introduction of the RADEON(TM) 9500 and RADEON(TM) 9500 PRO. -- ATI delivered the ultimate visual and home entertainment experience on a PC with the introduction and shipment of the ALL-IN-WONDER(R) 9700 PRO. -- ATI's FIRE GL(TM) X1 workstation graphics board - based on the RADEON(TM) 9700 visual processing unit - began shipping into Dell's high-end workstation, the Precision 650. -- ATI had a successful ramp of its integrated graphics chip products in the value segment of the PC market with the RADEON(TM) IGP 320M and IGP 340M. -- ATI broadened its reach into Asia-Pacific with design wins with Legend and Founder - the top computer manufacturers in China. -- ATI won the PC Magazine Award for Technical Excellence for the RADEON(TM) 9700 PRO. Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Interim Financial Results Revenues Revenues for the first quarter were $322.0 million, up 34.5 per cent from $239.5 million in the fourth quarter of fiscal 2002, and up 28.8 per cent from $250.0 million in the first quarter of fiscal 2002. Among the factors contributing to this increase in revenues were a broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased market demand for ATI's visual processing units led by the RADEON(TM) 9700 and the RADEON(TM) 9000 product families and a strong launch into the value segment of the PC market with ATI's new line of integrated chipset A group of chips designed to work as a unit to perform a function. For example, a modem chipset contains all the primary circuits for transmitting and receiving. A PC chipset provides the electronic interfaces between all subsystems (see PC chipset for illustration). products. Gross Margins Gross margins for the first quarter were 27.3 per cent of sales compared to 30.1 per cent in the fourth quarter and 32.0 per cent in the same quarter a year earlier. The decrease in gross margins sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen and year-over-year resulted primarily from the writedown writedown A reduction in the value of an asset carried on a firm's financial statements. For example, the firm's accountants, believing the inventory is overvalued, may decide to take a writedown by reducing inventory valuation. in the inventory value of certain products which was responsible for 3 percentage points of the decline. Additionally, 2 percentage points of the decline can be attributed to a slower transition in the implementation of cost reductions. Nintendo royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. revenues, however, were stronger than expected. Although the Company believes that gross margins should improve somewhat in the second quarter, it currently does not expect to approach margins in its target range of 32 - 35 per cent until the fourth quarter of fiscal 2003. Operating Expenses Operating expenses, excluding amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , were $79.6 million, up 13.5 per cent from $70.1 million in the fourth quarter of fiscal 2002, and up 15.1 per cent from $69.1 million for the first quarter of fiscal 2002. The sequential One after the other in some consecutive order such as by name or number. and year-over-year quarterly increase in research and development was largely due to higher costs related to prototyping, tools and licensing fees. Higher variable selling costs due to increased revenues were responsible for $2.5 million of the increase in selling and marketing expenses in the first quarter compared to the fourth quarter of fiscal 2002. Total operating expenses decreased $20.9 million, or 20.1 per cent in the first quarter to $82.8 million compared to the fourth quarter of fiscal 2002 and decreased 8.4 per cent for the same period a year earlier. These decreases were largely the result of the adoption of the accounting policies relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the treatment of goodwill and intangible assets (CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) Handbook
This article is about reference works. For the subnotebook computer, see .
1. pertaining to color; stainable with dyes. 2. pertaining to chromatin. chro·mat·ic adj. 1. Relating to color or colors. Research. Net Income Net income in the first quarter of fiscal 2003 was $5.0 million or $0.02 per share compared to a net loss of $32.2 million or $0.14 per share for the fourth quarter of fiscal 2002 and a net loss of $10.3 million or $0.04 per share for the same quarter a year ago. The increase in net income compared to the prior quarters is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to lower operating expenses resulting from the adoption of the accounting policies relating to the treatment of goodwill and intangible assets (CICA Handbook Section 3062) somewhat offset by higher research and development and selling, marketing and administrative expenses. Adjusted net income(2) for the quarter was $7.0 million or $0.03 per share compared to $2.4 million or $0.01 per share for the previous quarter, and $10.4 million or $0.04 per share for the same period a year ago. Significantly higher revenues, offset somewhat by a decrease in gross margin per cent and increased research and development expenses, drove the increase in adjusted net income relative to the fourth quarter of 2002. The decrease in adjusted net income for the quarter compared to the first quarter a year ago is a result of decreased gross margin percentage realized on higher revenues and increased research and development expenses. Liquidity and Financial Resources ATI's cash used in operations was $31.0 million in the first quarter of fiscal 2003, compared to cash used in operations of $2.7 million in the fourth quarter of fiscal 2002. The increase in cash used in operations during the quarter was primarily a result of the increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying associated with the strong revenue performance. Inventory levels declined slightly to $172.4 million at the end of the first quarter compared with $175.3 million at the end of the fourth quarter in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite a higher level of sales. As of November 30, 2002, ATI had working capital of $381.5 million, compared to $361.7 million at the end of the fourth quarter of fiscal 2002. The Company's cash position was $200.1 million as of November 30, 2002, compared to $236.9 million at August 31, 2002. The decline was largely due to an increase in accounts receivable as a result of a sharp increase in sales in the quarter. Intangible assets other than goodwill declined to $16.4 million at the end of the first quarter of fiscal 2003, from $21.9 million in the fourth quarter of fiscal 2002. The decline in these assets was due to the continued amortization of intangible assets of prior acquisitions. In addition, as a result of the adoption of CICA Handbook Section 3062, the Company reclassified $2.3 million relating to workforce from intangible assets to goodwill. In the first quarter, ATI adopted the new accounting policies relating to the treatment of goodwill and intangible assets (CICA Handbook Section 3062) and therefore there will be no further amortization of goodwill. Goodwill, which is associated primarily with the prior acquisition of ArtX, is currently $190.1 million and will be tested for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. on an annual basis. Accounts receivable increased by $49.6 million during the quarter to $213.9 million. This increase was primarily due to the sharp increase in sales during the quarter. Accounts payable declined by $3.1 million in the first quarter to $169.0 million. Adjusted Net Income - Reconciliation The table below presents adjusted net income and adjusted net income per share, which excludes the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. effect of gain on investments, amortization of goodwill(A) and intangible assets related to the Company's acquisitions, and deferred tax recovery of future tax liability pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to intangible assets acquired, related to the Company's acquisitions. (Thousands of US dollars, except per share amounts)
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Three months ended
November 30
2002 2001
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(unaudited)
Net Income (loss) - GAAP basis $4,988 $(10,319)
Gain on investments (32) -
Amortization of intangible assets(A) 3,165 21,190
Net tax on sale of investments 6 -
Deferred tax recovery of future
tax liability on intangible assets (1,141) (486)
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Adjusted net income $6,986 $10,385
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Adjusted net income per share
Basic and diluted $0.03 $0.04
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Weighted average
number of shares (000's):
Basic 236,947 232,496
Diluted 243,298 244,916
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(A) Effective September September: see month. 1, 2002, the Company no longer amortizes goodwill. See Note 2 to the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . (1)Adjusted net income excludes the after-tax effect of gain (loss) on investments (net), amortization of goodwill and intangible assets related to the Company's acquisitions, and the deferred tax recovery of future tax liability pertaining to goodwill and intangible assets acquired. Each of these items has been excluded from adjusted net income as they are not considered to be part of the Company's normalized ongoing operations. While the Company recognizes that adjusted net income does not have any standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning described by generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , or GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). , and that its adjusted net income calculation cannot be used as a comparison to other companies' financial performance, ATI believes that its adjusted net income more appropriately reflects the Company's operating performance. Please see the table titled "Adjusted Net Income - Reconciliation" in Management's Discussion and Analysis of Interim Financial Results in this news release for the reconciliation between adjusted net income and net income which is determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. All dollar amounts are stated in U.S. dollars unless otherwise noted. All per share amounts are stated on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis unless otherwise noted. (2)Adjusted net income excludes the after-tax effect of gain (loss) on investments (net), amortization of goodwill and intangible assets related to the Company's acquisitions, and the deferred tax recovery of future tax liability pertaining to goodwill and intangible assets acquired. Each of these items has been excluded from adjusted net income as they are not considered to be part of the Company's normalized ongoing operations. While the Company recognizes that adjusted net income does not have any standardized meaning described by generally accepted accounting principles, or GAAP, and that its adjusted net income calculation cannot be used as a comparison to other companies' financial performance, ATI believes that its adjusted net income more appropriately reflects the Company's operating performance. Please see the table titled "Adjusted Net Income - Reconciliation" below for the reconciliation between adjusted net income and net income which is determined in accordance with GAAP. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. and Uncertainties Certain statements in this press release constitute "forward-looking statements." When used in this press release, words such as "plans," "intends," "anticipates," "should," "estimates," "expects," "believes," "indicates," "targeting," "suggests," and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on current expectations and entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary various risks and uncertainties that are outlined in this press release and in the Company's 2002 Annual Report and 2001 Annual Information Form. As a result of these risks and uncertainties, the Company's operating results and common share price may be subject to significant volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the , particularly on a quarterly basis. For example, the markets for the Company's products are characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by changing market conditions, frequent new product introductions, seasonal and variable demand and rapid technology changes. Other factors that could cause the Company's results to vary include, but are not limited to, lack of anticipated growth in the demand for PCs, gaming consoles See video game console. and consumer electronic devices in which the Company's products are incorporated, reductions in the Company's average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. for its products due to competitive pressures and other factors, the introduction of new products by the Company's competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. which render (1) To make visible; to draw. The term comes from the graphics world where a rendering is an artist's drawing of what a new structure would look like. In computer-aided design (CAD), a rendering is a particular view of a 3D model that has been converted into a realistic image. the Company's products non-competitive, delays encountered by the Company in developing new products or enhancements, including integrated graphics and core logic components, in the time frame required by its customers, delays in manufacturing or unfavourable manufacturing yields experienced by the Company's independent foundries, unexpected variances in material costs, including silicon wafer (1) A small, thin continuous-loop magnetic tape cartridge that has been used from time to time for data storage and specialized applications. (2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. , memory and printed circuit boards, and constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. on the supply of components utilized in the Company's products and in the PC industry generally. These risks and uncertainties could cause or contribute to actual results that are materially different from those anticipated or experienced in the past. Additional information concerning factors that could cause the Company's financial results to fluctuate is contained in the Company's filings with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. and U.S. securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities . ATI disclaims any obligation or intention to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Conference Call Information ATI Technologies Inc. will host a conference call to discuss its financial results for the first quarter financial results today at 10:00 AM (EST EST electroshock therapy. EST abbr. electroshock therapy ) (7:00 AM Pacific, 9:00 AM Central, 8:00 AM Mountain) today. To participate in the conference call, please dial 416-405-9328 ten minutes before the scheduled start of the call. No password A secret word or code used to serve as a security measure against unauthorized access to data. It is normally managed by the operating system or DBMS. However, the computer can only verify the legitimacy of the password, not the legitimacy of the user. See NCSC. is required. A live web cast of the conference call will be available at http://www.ati.com/companyinfo/ir/quarterlyresults.html under the Financial Information section, under 2003 Conference Calls - Q1 2003. Replays of the conference call will be available through December December: see month. 25, 2002. Please call 416-695-5800, passcode 1293372. A web cast replay will be available at the web site noted above. About ATI Technologies ATI Technologies Inc. is a world leader in the design and manufacture of innovative 3D graphics and digital media silicon solutions. An industry pioneer since 1985, ATI is the world's foremost visual processor unit (VPU VPU Video Processing Unit VPU Vice Presidential Unit (World Bank) VPU Vicaría Pastoral Universitaria (Santiago, Chile) VPU Vulnerable Prisoner Unit (UK) ) provider and is dedicated to deliver leading-edge performance solutions for the full range of PC and Mac desktop and notebook platforms, workstation, set-top and digital television, game console See video game console. and handheld handheld: see personal digital assistant. markets. With 2002 revenues in excess of $1 billion, ATI has more than 1,900 employees in the Americas A·mer·i·cas , the See America. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Asia. ATI common shares trade on NASDAQ (ATYT) and the
Toronto Stock Exchange Toronto Stock Exchange (TSE)Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (ATY). Copyright 2002 ATI Technologies Inc. All rights reserved. ATI and ATI product and product feature names are trademarks and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. registered trademarks of ATI Technologies Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice. - Financial Statements Attached - ATI TECHNOLOGIES INC. CONSOLIDATED con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: STATEMENTS OF OPERATIONS (Unaudited)
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Three months ended
November 30 November 30
2002 2001
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Revenues $ 322,020 100.0% $ 250,038 100.0%
Cost of goods sold 234,015 72.7% 169,960 68.0%
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Gross Margin 88,005 27.3% 80,078 32.0%
Expenses
Selling and
marketing 21,938 6.8% 20,289 8.1%
Research and
development 48,450 15.0% 40,070 16.0%
Administrative 9,212 2.9% 8,781 3.5%
Amortization of
intangible assets 3,165 1.0% 21,190 8.5%
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82,765 25.7% 90,330 36.1%
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Income (loss) from
operations 5,240 1.6% (10,252) (4.1%)
Interest and other
income 540 0.2% 1,729 0.7%
Gain on investments, net 32 - - -
Interest expense (426) (0.1%) (2) -
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Income (loss) before
income taxes 5,386 1.7% (8,525) (3.4%)
Income taxes 398 0.2% 1,794 0.7%
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Net income (loss) $ 4,988 1.5% $ (10,319) (4.1%)
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Net income (loss)
per share (Note 6)
Basic and diluted $ 0.02 $ (0.04)
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Weighted average
number of shares
(000's)
Basic 236,947 232,496
Diluted 243,298 232,496
Outstanding number
of shares at the end
of the quarter
(000's) 236,989 232,787
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See accompanying notes to consolidated financial statements. These
financial statements should be read in conjunction with the
Company's most recent annual consolidated financial statements,
as at and for year ended August 31, 2002.
ATI TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Thousands of US dollars)
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November 30 August 31
2002 2002
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(Unaudited)
Assets
Current assets:
Cash and cash equivalents $200,123 $187,126
Short-term investments - 49,801
Accounts receivable 213,899 164,259
Inventories 172,405 175,348
Prepayments and sundry receivables 23,579 21,131
Income taxes receivable 4,206 -
Future income tax assets 3,662 3,630
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Total current assets 617,874 601,295
Capital assets 92,887 95,838
Intangible assets (Note 2) 16,413 21,858
Goodwill (Note 2) 190,095 187,815
Long-term investments 7,405 7,405
Future income tax assets 831 844
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Total Assets $925,505 $915,055
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Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ - $12,015
Accounts payable 169,009 172,093
Accrued liabilities 61,685 51,087
Deferred revenue 126 250
Income taxes payable - 170
Current portion of long-term debt (Note 3) 1,174 568
Future income tax liabilities 4,357 3,459
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Total current liabilities 236,351 239,642
Long-term debt (Note 3) 25,772 15,798
Future income tax liabilities 11,074 12,588
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Total liabilities 273,197 268,028
Shareholders' equity:
Share capital 561,770 561,477
Contributed surplus 4,630 4,630
Retained earnings 77,634 72,646
Currency translation adjustment 8,274 8,274
Total shareholders' equity 652,308 647,027
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Total Liabilities
and Shareholders' Equity $925,505 $915,055
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See accompanying notes to consolidated financial statements. These
financial statements should be read in conjunction with the
Company's most recent annual consolidated financial statements, as
at and for year ended August 31, 2002.
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of US dollars)
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Three months ended
November 30
2002 2001
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Cash provided by (used in):
Operating activities:
Net income (loss) $4,988 $ (10,319)
Add items not affecting working capital:
Future income taxes (635) (1,295)
Depreciation and amortization 9,243 26,487
Gain on investments (32) -
Foreign exchange loss 320 24
Net changes in non-cash working capital
balances relating to operations:
Accounts receivable (49,640) (43,465)
Inventories 2,943 7,423
Prepayments and sundry receivables (1,179) 201
Income taxes receivable (4,376) (1,096)
Accounts payable (3,084) 26,862
Accrued liabilities 10,598 5,397
Deferred revenue (124) (125)
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(30,978) 10,094
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Financing activities:
Increase (decrease) in bank indebtedness (12,015) 496
Increase in long-term debt 10,709 -
Principal payment under capital
lease obligation (275) -
Settlement of swap contract (1,365) -
Issuance of common shares 293 1,306
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(2,653) 1,802
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Investing activities:
Purchase of short-term investments - (4,601)
Maturity of short-term investments 49,649 25,000
Additions to capital assets (3,127) (4,738)
Proceeds from sale of investments 280 -
Acquisitions, net of cash acquired - (2,067)
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46,802 13,594
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Foreign exchange loss on cash
held in foreign currency (174) (24)
-----------------------------------------------------------------
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Increase in cash and cash equivalents 12,997 25,466
Cash and cash equivalents
- beginning of period 187,126 171,455
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Cash and cash equivalents
- end of period 200,123 196,921
Short-term investments - 24,601
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Cash position - end of period 200,123 $221,522
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Cash position is defined as cash and cash equivalents and
short-term investments. See accompanying notes to consolidated
financial statements. These financial statements should be read in
conjunction with the Company's most recent annual consolidated
financial statements, as at and for year ended August 31, 2002.
ATI TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS November 30, 2002 (Unaudited) The principal business activities of ATI Technologies Inc. (the "Company") are the design, manufacture and sale of 3D graphics and digital media silicon solutions. The Company markets its products to original equipment manufacturers, system builders, distributors and retailers primarily in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Europe and Asia-Pacific The term Asia-Pacific generally applies to littoral East Asia, Southeast Asia and Australasia near the Pacific Ocean, plus the states in the ocean itself (Oceania). . 1. SIGNIFICANT ACCOUNTING POLICIES The accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. unaudited financial statements are prepared in accordance with Canadian generally accepted accounting principles for interim financial statements. These financial statements and notes related thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. should be read in conjunction with the Company's most recent annual consolidated financial statements, as at and for the year ended August 31, 2002. These consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual consolidated financial statements with the exception of the following: (a) CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based Payments: Effective September 1, 2002, the Company adopted Stock-based Compensation and Other Stock-based Payments in CICA Handbook Section 3870, which establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. provided by employees and non-employees. The standard requires that a fair value based method of accounting be applied to all stock-based payments to non-employees and to employee awards that are direct awards of stock, that call for settlement in cash or other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. or are stock appreciation rights that call for settlement by the issuance of equity instruments. However, the new standard permits the Company to continue its existing policy of recording no compensation cost on the grant of stock options to employees with the addition of pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma information. The Company has applied the pro forma disclosure provisions of the new standard to awards granted on or after September 1, 2002. No restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of prior periods was required as a result of the adoption of the new standard. Consideration paid by employees on the exercise of stock options is recorded as share capital. See Note 9 for the pro forma disclosure as required by this standard. (b) CICA Handbook Section 1581, Business Combinations, and Section 3062, Goodwill and Other Intangible Assets: In September 2001, the CICA issued Handbook Sections 1581 "Business Combinations" and 3062 "Goodwill and Other Intangible Assets". The new standards mandate A judicial command, order, or precept, written or oral, from a court; a direction that a court has the authority to give and an individual is bound to obey. A mandate might be issued upon the decision of an appeal, which directs that a particular action be taken, or upon a the purchase method of accounting for business combinations and require that goodwill no longer be amortized but instead be tested for impairment at least annually. The standards also specify criteria criteria (krītēr´ē  ),n. that intangible assets must meet to be recognized and reported apart from goodwill. The standards require that the value of the shares issued in a business combination be measured using the average share price for a reasonable period before and after the date the terms of the acquisition are agreed to and announced. Previously, the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. date was used to value the shares issued in a business combination. The Company has fully adopted these new standards as of September 1, 2002, and has discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: amortization of all existing goodwill. The Company has also reviewed existing intangible assets, including estimates of remaining lives, and has reclassified $2.3 million from workforce to goodwill as of September 1, 2002 to conform with the new criteria. In connection with Section 3062's transitional goodwill impairment evaluation, the Company is required to assess whether goodwill is impaired See assistive technology. as of September 1, 2002. The Company has up to six months to determine the fair value of its reporting units and compare that to the units' carrying amounts. To the extent a reporting unit's carrying amount exceeds its fair value, the Company must perform a second step to measure the amount of impairment in a manner similar to a purchase price allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as . This second step is to be completed no later than August 31, 2003. Any transitional impairment will be recognized as an effect of a change in accounting principle and will be charged to opening retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. as of September 1, 2002. Effective September 1, 2002, the Company had unamortized goodwill of $190.1 million which is no longer being amortized. This change in accounting policy is not applied retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin and the amounts presented for prior periods have not been restated for this change. The impact of this change is as follows:
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Three months ended
(Thousands of US dollars, November 30
except per share amounts) 2002 2001
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income (loss) $ 4,988 $ (10,319)
Add back: goodwill amortization - 19,132
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Net income before goodwill amortization $ 4,988 $ 8,813
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Basic and diluted income (loss) per share:
Net income (loss) $ 0.02 $ (0.04)
Net income before goodwill amortization 0.02 0.04
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2. GOODWILL AND INTANGIBLE ASSETS The net book values of goodwill and intangible assets acquired related to NxtWave Communications, FGL 1. FGL - Flow Graph Lisp. A distributed dataflow language for AMPS (Applicative Multi-Processing System). "A Loosely-Coupled Applicative Multi-Processing System", R. Keller et al, NCC, AFIPS June 1979, pp.613- 622. 2. FGL - Function Graph Language. Related to FEL. Graphics, ArtX and Chromatic Research Inc. at November 30, 2002 and August 31, 2002 are as follows:
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Cost Accumulated Net book Net book
amortization value value
(Thousands of US dollars) November 30, 2002 August 31, 2002
--------------------------------------------------------------------
--------------------------------------------------------------------
Purchased in-process
R & D $ 105,550 $ 102,458 $ 3,092 $ 4,417
Workforce - - - 2,280
Core technology 32,544 19,223 13,321 15,161
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Total intangible
assets $ 138,094 $ 121,681 $ 16,413 $ 21,858
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Goodwill $ 392,357 $ 202,262 $190,095 $187,815
--------------------------------------------------------------------
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Amortization expense related to intangible assets amounted to $3.2 million for the three months ended November 30, 2002 (2002 - $2.1 million). Amortization expense related to goodwill was nil for the three months ended November 30, 2002 (2002 - $19.1 million). $2.3 million was reclassified from workforce to goodwill as of September 1, 2002 to conform with the new accounting standards as required by the CICA Handbook Section 3062 "Goodwill and Other Intangible Assets." 3. LONG-TERM DEBT Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt.
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Interest November August
(Thousands of US dollars) rate 30 2002 31 2002
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Obligation under capital lease (i) 6.31% $ 16,163 $ 16,366
Mortgage payable (ii) 6.96% 10,783 -
--------------------------------------------------------------------
26,946 16,366
Current portion of long-term debt 1,174 568
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Total $ 25,772 $ 15,798
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(i) Obligation under capital lease: The Company's obligation under capital lease represents the lease on the building facility in Markham, Ontario Markham (2006 Population 261,573[0]) is located in York Region, directly north of Toronto, and is part of Toronto's CMA. It is larger than many Canadian cities. Despite its qualifications regarding population, it has not had the title of city conferred upon it by the . (ii) Mortgage payable: On September 10, 2002, the joint venture, Commerce Valley Realty realty n. a short form of "real estate." (See: real estate) REALTY. An abstract of real, as distinguished from personalty. Realty relates to lands and tenements, rents or other hereditaments. Vide Real Property. Holding Inc. ("CVRH CVRH Canadian Valley Regional Hospital (Yukon, OK) "), in which the Company has a 50 per cent ownership interest entered into a mortgage agreement with a lender to finance the building facility in Markham, Ontario. The Company's proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. share of the mortgage amounted to $10.8 million (Cdn. $16.9 million), and the mortgage has a repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan term of 12 years bearing interest at a rate of 6.96 per cent per annum Per annum Yearly. . The underlying mortgage is denominated in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents . Funding under the mortgage was received in October October: see month. 2002. 4. GUARANTEE The Company and other owners of CVRH have jointly and severally Jointly and Severally 1. A legal term describing a partnership in which individual decisions are bound to all parties involved and thus undivided. 2. A term used in underwriting syndicates to refer to the distinct responsibility of individual companies to sell a certain provided a guarantee for the mortgage payment of the building facility in Markham, Ontario. In the event that CVRH is unable to meet the underlying mortgage payment to the lender, the Company and other owners of CVRH will be jointly and severally responsible for it under this guarantee. The monthly mortgage interest and principal payment amounts to approximately $0.2 million. The mortgage has a repayment term of 12 years with a maturity date on November 1, 2014. As of November 30, 2002, the outstanding amount of the mortgage stood at $21.6 million. In addition, the Company posted a letter of credit in the amount of $1.9 million in favour Favor or favour (see spelling differences) may be
tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. this letter of credit for the exclusive benefit of the lender as additional security of the mortgage. The letter of credit has a term of 5 years and will expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. on November 5, 2007. In the event of a lease default by the Company, the proceeds of the letter of credit will be paid to the lender. 5. LOSS ON INTEREST RATE SWAP Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. In fiscal 2001, CVRH entered into an interest rate swap contract to hedge its exposure to the interest rate risk applicable to its mortgage for the building facility in Markham, Ontario. This interest rate swap contract closed on September 10, 2002 resulting in a proportionate loss of $1.4 million to the Company. The loss is treated as a deferred expense item in the balance sheet and is charged to the consolidated statements of operations and retained earnings as a yield adjustment to the interest expense, over the term of the mortgage. 6. NET INCOME (LOSS) PER SHARE The following table presents a reconciliation of the numerators and denominators used in the calculations of the basic and diluted income (loss) per share:
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Three months ended
November 30
(Thousands of US dollars, except
per share amounts) 2002 2001
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income (loss) $ 4,988 $ (10,319)
--------------------------------------------------------------------
--------------------------------------------------------------------
Weighted average number of common shares
outstanding:
Basic 236,947 232,496
Effect of stock options 6,351 -
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Diluted 243,298 232,496
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--------------------------------------------------------------------
Net income (loss) per share:
Basic and diluted $ 0.02 $ (0.04)
--------------------------------------------------------------------
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7. SUPPLEMENTAL CASH FLOW INFORMATION
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Three months ended
November 30
(Thousands of US dollars) 2002 2001
--------------------------------------------------------------------
--------------------------------------------------------------------
Cash paid for:
Interest $ 358 $ 3
Income taxes $ 211 $ 110
Interest received $ 1,084 $ 1,626
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8. SEGMENTED INFORMATION The Company operates in one operating segment, that being the design, manufacture and sale of 3D graphics and digital media silicon solutions. The following tables provide revenues by geographic area and by product, as well as capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) , intangible assets and goodwill by geographic area:
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Three months ended
November 30
(Thousands of US dollars) 2002 2001
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--------------------------------------------------------------------
Revenues:
Canada $ 6,721 $ 4,695
United States 67,485 74,119
Europe 31,448 41,192
Asia-Pacific 216,366 130,032
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Consolidated revenues $ 322,020 $ 250,038
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Product revenues:
Components $ 202,436 $ 123,312
Boards 105,394 119,593
Others 14,190 7,133
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Consolidated revenues $ 322,020 $ 250,038
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Capital assets, intangible assets
and goodwill:
Canada $ 76,818 $ 53,967
United States 217,144 277,986
Europe 4,551 4,950
Asia-Pacific 882 771
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Consolidated capital assets, intangible
assets and goodwill $ 299,395 $ 337,674
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9. STOCK-BASED COMPENSATION For stock options granted to employees, had the Company determined compensation costs based on the "fair value" of the stock options at grant dates consistent with the method prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). under CICA Handbook Section 3870, the Company's net income per share would have been reported as the pro forma amounts indicated below:
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Three months
ended
(Thousands of US dollars, except per share
amounts) November 30,
2002
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income for the period, as reported $ 4,988
Pro forma adjustment for stock-based compensation (18)
--------------------------------------------------------------------
Pro forma net income $ 4,970
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--------------------------------------------------------------------
Pro forma net income per share - basic and diluted $ 0.02
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--------------------------------------------------------------------
The weighted average estimated fair value at the date of grant for the options granted for the three months ended November 30, 2002 was $3.55 per share. The "fair value" of each option granted was estimated on the date of the grant using the Black-Scholes option pricing model option pricing model A mathematical formula for determining the price at which an option should trade. The model expresses the value of an option as a function of the value of the underlying asset, length of time until maturity, exercise price, yields on with the following assumptions:
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Three months
ended
November 30,
2002
--------------------------------------------------------------------
--------------------------------------------------------------------
Risk-free interest rate 3.81%
Dividend yield 0%
Volatility factor of the expected market price of the
Company's common shares 69.75%
Weighted average expected life of the options 4.13 years
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--------------------------------------------------------------------
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis. 10. U.S. GAAP The following table reconciles the net income (loss) as reported on the consolidated statements of operations prepared in accordance with Canadian GAAP to the consolidated net income (loss) that would have been reported had the financial statements been prepared in accordance with U.S. GAAP:
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--------------------------------------------------------------------
Three months ended
November 30
(Thousands of US dollars, except per
share amounts) 2002 2001
--------------------------------------------------------------------
--------------------------------------------------------------------
Net income (loss) in accordance with
Canadian GAAP $ 4,988 $ (10,319)
Tax effect of stock options exercised (64) (73)
Amortization of purchased in-process
research and development 1,325 -
Amortization difference between Canadian
and U.S. GAAP (200) 602
Stock compensation expenses (4,308) (3,192)
--------------------------------------------------------------------
Net income (loss) in accordance with U.S.
GAAP $ 1,741 $ (12,982)
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--------------------------------------------------------------------
Net income (loss) per share:
Basic and diluted $ 0.01 $ (0.06)
--------------------------------------------------------------------
Weighted average number of shares (000's):
Basic 236,947 232,496
Diluted 243,298 232,496
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