ATI Reports Record Quarterly Results.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 -- Revenues increase 31% to $614 million E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]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 ) today announced record financial results for the first quarter of fiscal 2005. E[acute accent]Quarterly revenues(1) grew 30.7% to $613.9 million from $469.7 million in the first quarter of fiscal 2004 as a result of sales increases in both the personal computer and digital consumer product lines. Gross margin percentage was 34.2%. 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 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. 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 , beginning with the first quarter of fiscal 2005, 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. is expensing compensation costs associated with stock options granted to employees after September September: see month. 1, 2002. Net income and net income per share including compensation costs associated with stock options were $63.7 million and $0.25 respectively, up from $47.4 million and $0.19 for last year's first quarter. Compensation costs associated with stock options in the first quarter of fiscal 2005 were $8.0 million. Net income and net income per share excluding compensation costs associated with stock options were $71.4 million and $0.28 respectively. ATI's cash position increased $71.7 million during the quarter to $620.6 million at November November: see month. 30, 2004. E[acute accent](1) All dollar amounts are in U.S. dollars unless otherwise noted. All per share amounts are stated on a 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. ATI Technologies Inc. reports under Canadian generally accepted accounting principles (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). E[acute accent]"We continue to demonstrate our technology and industry leadership through innovation, execution and customer focus," 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). , ATI's Chief Executive Officer. "This has translated into the sustained financial and operational performance we have seen over the past several quarters. Looking ahead, we believe we will continue to grow our business by helping consumers to create, connect and communicate in new ways - whether it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have bringing 3D and camera features to mobile phones or high definition content to home PCs." E[acute accent]Outlook E[acute accent]Looking forward, we expect our leadership in graphics and multimedia technologies to continue to drive growth for ATI. Despite seasonal weakness in our consumer and game console See video game console. businesses, we expect our revenues in the second quarter to be similar to the first quarter within a range of plus or minus $20 million - led by growth in PC graphics. We expect gross margin in the second quarter to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. the same as the first quarter of fiscal 2005 as improved PC margins should offset seasonal weakness of our consumer products and game console businesses. 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 the expense associated with stock options, are expected to grow just over 10% relative to the first quarter due 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. costs and the foreign exchange impact of the appreciation of the Canadian dollar 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 relative to the U.S. currency. E[acute accent]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 E[acute accent]This is management's discussion and analysis of financial condition and the results of operations (MD&A) that comments on ATI's operations, financial condition and cash flows for the three months ended November 30, 2004 compared to the three months ended November 30, 2003. This MD&A should be read in conjunction with the attached unaudited financial statements for the period ended November 30, 2004, the annual MD&A contained in the 2004 Annual Report and the audited 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 for the year ended August 31, 2004. E[acute accent]In this MD&A, ATI, we, us and our mean ATI Technologies Inc. and its subsidiaries. E[acute accent]Important Information Regarding 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. E[acute accent]Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as "plans," "intends," "anticipates," "should," "estimates," "expects," "believes," "indicates," "targeting," "suggests" and similar expressions. E[acute accent]This MD&A and other sections of this news release contain forward-looking statements about ATI's objectives, strategies, financial condition and results. These "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " 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. Our actual results may materially differ from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Therefore we cannot provide any assurance that forward-looking statements will materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. . We assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. Additional information concerning risks and uncertainties affecting our business and other factors that could cause our financial results to fluctuate is contained in our filings with Canadian 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 , including our 2003 Annual Information Form and 2004 Annual Report filed on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review at www.sedar.com. E[acute accent]Unless indicated otherwise, this MD&A reflects our expectations as of December December: see month. 21, 2004. E[acute accent]Any reference to "year-over-year" in this MD&A refers to a comparison of this year's first quarter results versus the first quarter of the prior year unless otherwise noted. E[acute accent]RESULTS OF OPERATIONS E[acute accent]Revenues E[acute accent]First quarter revenues grew 30.7% to $613.9 million from $469.7 million in the same period a year ago. PC revenues increased just over 20% on strong sales of discrete A component or device that is separate and distinct and treated as a singular unit. desktop products to the add-in board (AIB AIB n abbr (BRIT) (= Accident Investigation Bureau) → oficina de investigación de accidentes AIB n abbr (Brit) (= Accident Investigation Bureau) → ) channel and from PCI Express A high-speed peripheral interconnect from Intel introduced in 2002. Note that although sometimes abbreviated "PCX," PCI Express is not the same as "PCI-X" (see PCI-SIG and PCI-X for comparison). As a result of the confusion, "PCI-E" or "PCIe" is the accepted abbreviation. design wins with PC Original Equipment Manufacturers (OEMs). Total notebook See notebook computer. 1. (computer) notebook - laptop computer. 2. (tool) notebook - Labtech Notebook. revenues increased by about 20% on strong sales of discrete products. This was partially offset by lower sales of integrated products, which form a growing portion of the notebook market overall and where our market share is lower than that of discrete. Handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. chip revenues grew about 80% due to a growing number of design wins and robust market demand for feature phones in general. Revenues from digital television products grew dramatically based on market growth, design wins and the continued penetration of our products among top digital TV manufacturers. E[acute accent]Gross Margin E[acute accent]Gross margin percentage for the first quarter of fiscal 2005 was down 1.7 percentage points to 34.2% from 35.9% for the same period a year ago. The margin percentage for our desktop discrete products declined relative to the first quarter of the previous year primarily due to production costs associated with the introduction and ramp of our new PCI Express products. The overall margin percentage decline was partially offset by the sales growth in our consumer business, which has margins that are typically higher than our corporate average. E[acute accent]The 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. income we received from Nintendo for our graphics technology used in their GAMECUBE products also increased year-over-year, which has a positive impact on gross margin percentage. E[acute accent]Operating Expenses E[acute accent]In the first quarter of fiscal 2004, ATI announced a Restricted Share Unit program. A component of the program was a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. cash payment to non-executive non-executive adj non-executive director → direttore m senza potere esecutivo employees. This cash payment of $7.8 million impacted operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. in the first quarter of fiscal 2004. This was not a factor in the first quarter of fiscal 2005. E[acute accent]Selling and marketing expenses increased 10.3% to $34.3 million, but declined as a percentage of revenues to 5.6% from 6.6% in the first quarter of last year. The absolute increase was related primarily to increased staffing levels for sales and technical support, which was partially offset by lower advertising costs and the cash payment in fiscal 2004 referred to above. E[acute accent]Administrative expenses were up 10.4% to $12.7 million from $11.5 million, but declined as a percentage of revenue to 2.1% from 2.5% in the first quarter of last year. The absolute increase was related primarily to increased staffing to support our growth, which was partially offset by lower costs associated with the cash payment in fiscal 2004 referred to above. E[acute accent]Research and development expenses increased 15.5% year-over-year to $73.1 million, but declined as a percentage of revenue to 11.9% from 13.5% in the first quarter of last year. The absolute increase was largely a result of adding technical staff across the organization to support our growth, but higher prototyping costs - particularly in desktop, integrated notebook and handheld handheld: see personal digital assistant. devices - also contributed to the increase. These were partially offset by lower costs associated with the cash payment in fiscal 2004 referred to above. E[acute accent]Stock-based Compensation E[acute accent]In accordance with Canadian generally accepted accounting principles, effective the first quarter of fiscal 2005, ATI is expensing compensation costs associated with stock options granted to employees after September 1, 2002. This expense item, along with the expense associated with restricted share units and deferred share units, is reflected in the expense for stock-based compensation included in the attached 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 and 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. . Prior to the first quarter of fiscal 2005, the expense associated with restricted share units and deferred share units were reflected in selling and marketing, research and development and administrative expenses. E[acute accent]Stock-options, restricted share units and deferred share units comprise To embrace, cover, or include; to confine within; to consist of. In the law governing patents—grants of an exclusive right or privilege to make, use, or sell an invention or product for a term of years—the term comprise all stock-based compensation currently awarded by ATI to our employees and directors. Stock-based compensation costs were $10.6 million in the quarter as compared with $0.8 million in the same period last year. The increase in stock-based compensation was primarily related to ATI commencing the expensing of stock options in compliance with Canadian generally accepted accounting principles during the first quarter of fiscal 2005. E[acute accent]The $10.6 million expense in the first quarter of fiscal 2005 included $8.0 million for compensation costs associated with stock options, $2.0 million for compensation costs associated with restricted share units and $0.6 million for deferred share units. E[acute accent]Total Operating Expenses E[acute accent]Our total operating expenses reflect the operating expenses detailed earlier, as well as 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. and other charges. For further information on the treatment of the amortization of intangible assets, please see Note 4 to our unaudited interim consolidated financial statements. E[acute accent]Interest and Other Income (Loss) E[acute accent]Interest and other income was $2.2 million in the first quarter of 2005, compared with a charge of $1.8 million for the comparable period in fiscal 2004. The increase partially reflects investment income derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from interest on our higher cash balances. A write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → during the first quarter of fiscal 2004 also contributed to the increase in interest and other income this quarter relative to last year. E[acute accent]Net Income E[acute accent]Net income increased 34.3% to $63.7 million in the first quarter of fiscal 2005 from $47.4 million in the same quarter last year largely due to substantial growth in revenue. Net income per share increased to $0.25 from $0.19 over the same period. Net income and net income per share excluding the compensation costs associated with stock options described above were $71.4 million and $0.28 respectively for the first quarter of fiscal 2005. E[acute accent]Liquidity and Financial Resources E[acute accent]Inventory levels of $291.6 million at the end of the first quarter increased from $254.9 million at August 31, 2004. The increase was a result of increased sales and our need to maintain adequate levels of inventory to meet customer demands. Inventory turnover was just over our target of 60 days. E[acute accent]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 were up 9.1% to $399.1 million from $365.6 at fiscal 2004 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . Accounts payable rose 7.6% to $295.6 million from $274.8 million at year-end. Both accounts receivable and accounts payable are at levels consistent with our business volumes. E[acute accent]As of November 30, 2004 we had working capital of $784.4 million compared to $694.7 million at August 31, 2004. Cash flows from operations were $66.9 million in the first quarter. Our cash position at quarter end was $620.6 million, up from $548.9 million at August 31, 2004. E[acute accent]Outstanding Share Data E[acute accent]At November 30, 2004 there were 251,323,648 common shares outstanding or 257,472,468 shares on a diluted basis. E[acute accent]ACCOUNTING POLICIES E[acute accent]Our unaudited interim consolidated financial statements are prepared according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Canadian GAAP. The key estimates and assumptions that management has made and their impact on the amounts reported in the unaudited interim consolidated financial statements and notes remain substantially unchanged from those described in our 2004 Annual MD&A, with the exception of the adoption in the first quarter of fiscal 2005 of the revised 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 .
E[acute accent]SUPPLEMENTARY FINANCIAL INFORMATION E[acute accent]The table below shows selected financial information for the eight most recently completed quarters.
(Thousands of U.S. dollars, except per share amounts)
(Unaudited)
Q1 2005 Q4 2004 Q3 2004 Q2 2004 Q1 2004
---------------------------------------------------------------------
Revenues $613,859 $572,218 $491,457 $463,337 $469,705
Cost of goods sold 403,789 378,792 317,776 301,946 301,083
--------------------------------------------------
Gross margin 210,070 193,426 173,681 161,391 168,622
Expenses
Selling and
marketing 34,345 30,288 32,385 27,999 31,130
Research and
development 73,114 75,865 65,539 60,809 63,278
Administrative 12,676 11,517 12,166 11,532 11,487
Amortization of
intangible assets 1,244 1,486 1,546 1,541 1,542
Stock-based
compensation 10,558 1,691 2,315 2,826 751
Other charges
(recoveries) 382 155 (454) (178) 173
--------------------------------------------------
132,319 121,002 113,497 104,529 108,361
--------------------------------------------------
Income (loss) from
operations 77,751 72,424 60,184 56,862 60,261
Interest and other
income (loss) 2,176 2,815 1,340 1,856 (1,754)
Gain (loss) on
investments - - (1,307) - -
Interest expense (519) (499) (513) (531) (515)
--------------------------------------------------
Income (loss)
before income taxes 79,408 74,740 59,704 58,187 57,992
Income taxes 15,705 13,584 11,085 10,602 10,553
--------------------------------------------------
Net income (loss) $63,703 $61,156 $48,619 $47,585 $47,439
--------------------------------------------------
--------------------------------------------------
Net income (loss)
per share
Basic $0.26 $0.25 $0.20 $0.19 $0.20
Diluted $0.25 $0.24 $0.19 $0.19 $0.19
---------------------------------------------------------------------
Weighted average number
of shares (000's)
Basic 249,027 247,699 245,960 244,373 242,998
Diluted 257,472 258,198 256,650 255,876 254,109
Outstanding number
of shares at the
end of the period
(000's) 251,324 249,287 247,886 246,604 244,239
---------------------------------------------------------------------
Q4 2003 Q3 2003 Q2 2003
---------------------------------------------------------------------
Revenues $380,674 $355,691 $313,492
Cost of goods sold 245,191 239,590 222,969
-------------------------------------
Gross margin 135,483 116,101 90,523
Expenses
Selling and marketing 27,628 25,696 21,354
Research and development 61,285 53,713 49,528
Administrative 10,557 10,326 9,318
Amortization of intangible assets 1,271 3,169 3,162
Stock-based compensation - - -
Other charges (recoveries) 10,440 2,288 15,996
-------------------------------------
111,181 95,192 99,358
-------------------------------------
Income (loss) from operations 24,302 20,909 (8,835)
Interest and other income (loss) 714 (1,350) 602
Gain (loss) on investments 3,844 - -
Interest expense (516) (488) (469)
-------------------------------------
Income (loss) before income taxes 28,344 19,071 (8,702)
Income taxes 6,050 4,063 715
-------------------------------------
Net income (loss) $22,294 $15,008 (9,417)
-------------------------------------
-------------------------------------
Net income (loss) per share
Basic $0.09 $0.06 ($0.04)
Diluted $0.09 $0.06 ($0.04)
---------------------------------------------------------------------
Weighted average number of
shares (000's)
Basic 240,647 238,183 237,227
Diluted 249,525 242,539 237,227
Outstanding number of shares
at the end of the period (000's) 241,742 239,267 237,297
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E[acute accent]Conference Call Information E[acute accent]ATI Technologies Inc. will host a conference call today at 8:30 AM (EST EST electroshock therapy. EST abbr. electroshock therapy ) to discuss its financial results for its fiscal 2005 first quarter ended November 30, 2004. 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 webcast of the call will be available at http://www.ati.com/companyinfo/ir/quarterlyresults.html under the Financial Information section, 2005 Conference Calls - Q1 2005. Replays of the conference call will be available through December 28, 2004 by calling 416-695-5800. The passcode is 3125450. A web cast replay will be available at the web site noted above. E[acute accent]About ATI Technologies E[acute accent]ATI Technologies Inc. is the 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 delivering leading-edge performance solutions for the full range of PC and Mac desktop and notebook platforms, workstation workstation Computer intended for use by one person, but with a much faster processor and more memory than an ordinary personal computer. Workstations are designed for powerful business applications that do large numbers of calculations or require high-speed graphical , set-top and digital television, game console and handheld device markets. With 2004 revenues of US $2 billion, ATI has more than 2,700 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). E[acute accent]Copyright 2004 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. E[acute accent]For media or industry analyst support, visit our Web site at http://www.ati.com
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
(Thousands of US dollars, except per share amounts)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended
November 30 November 30
2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Revenues $ 613,859 100.0% $ 469,705 100.0%
Cost of goods sold 403,789 65.8% 301,083 64.1%
---------------------------------------------------------------------
Gross margin 210,070 34.2% 168,622 35.9%
Expenses
Selling and marketing 34,345 5.6% 31,130 6.6%
Research and development 73,114 11.9% 63,278 13.5%
Administrative 12,676 2.1% 11,487 2.5%
Amortization of intangible
assets (Note 4) 1,244 0.2% 1,542 0.3%
Stock-based compensation 10,558 1.7% 751 0.2%
Other charges (Note 8) 382 - 173 -
---------------------------------------------------------------------
132,319 21.5% 108,361 23.1%
---------------------------------------------------------------------
Income from operations 77,751 12.7% 60,261 12.8%
Interest and other income (loss) 2,176 0.3% (1,754) (0.4%)
Interest expense (519) (0.1%) (515) (0.1%)
---------------------------------------------------------------------
Income before income taxes 79,408 12.9% 57,992 12.3%
Income taxes 15,705 2.5% 10,553 2.2%
---------------------------------------------------------------------
Net income 63,703 10.4% 47,439 10.1%
Retained earnings, beginning
of period 308,825 104,026
Adjustment to opening
retained earnings:
Change in accounting policy
on stock-based compensation
(Note 1(a)) (13,843) -
---------------------------------------------------------------------
---------------------------------------------------------------------
Retained earnings, end of
period $ 358,685 $ 151,465
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per share (Note 9)
Basic $ 0.26 $ 0.20
Diluted $ 0.25 $ 0.19
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average number of
shares (000's)
Basic 249,027 242,998
Diluted 257,472 254,109
Outstanding number of shares
at the end of the quarter
(000's) 251,324 244,239
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes to unaudited interim 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, 2004.
ATI TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of US dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
November 30 August 31
2004 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 518,032 $ 446,808
Short-term investments 102,584 102,108
Accounts receivable 399,064 365,644
Inventories 291,572 254,867
Prepayments and sundry receivables 34,397 21,873
Future income tax assets 9,307 8,076
---------------------------------------------------------------------
Total current assets 1,354,956 1,199,376
Capital assets 87,521 85,943
Intangible assets (Note 4) 7,227 5,558
Goodwill (Note 4) 190,095 190,095
Long-term investments 2,751 2,751
Tax credits recoverable 6,924 9,193
Future income tax assets 28,050 20,570
---------------------------------------------------------------------
Total Assets $ 1,677,524 $ 1,513,486
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 295,605 $ 274,772
Accrued liabilities 244,451 199,129
Deferred revenue 28,534 29,131
Current portion of long-term debt (Note 6) 1,761 1,571
Future income tax liabilities 230 54
---------------------------------------------------------------------
Total current liabilities 570,581 504,657
Long-term debt (Note 6) 30,472 28,053
Future income tax liabilities 40,184 36,088
---------------------------------------------------------------------
Total liabilities 641,237 568,798
Shareholders' equity:
Share capital 653,103 638,985
Treasury stock (14,867) (22,100)
Contributed surplus 31,092 10,704
Retained earnings 358,685 308,825
Currency translation adjustments 8,274 8,274
---------------------------------------------------------------------
Total shareholders' equity 1,036,287 944,688
---------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 1,677,524 $ 1,513,486
---------------------------------------------------------------------
---------------------------------------------------------------------
Subsequent event (Note 2)
Guarantee (Note 7)
See accompanying notes to unaudited interim 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, 2004.
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of US dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended
November 30 November 30
2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income $ 63,703 $ 47,439
Items which do not involve cash:
Tax credits recoverable 2,269 2,217
Future income taxes (707) (578)
Stock-based compensation 10,037 671
Depreciation and amortization 5,938 6,602
Gain on sale of long-lived assets (Note 8) - (538)
Unrealized foreign exchange loss 2,622 1,331
Change in non-cash operating working capital:
Accounts receivable (33,420) (34,442)
Inventories (36,705) (48,113)
Prepayments and sundry receivables (12,524) 6,387
Accounts payable 20,787 38,689
Accrued liabilities 45,494 14,527
Deferred revenue (597) 3,104
---------------------------------------------------------------------
66,897 37,296
---------------------------------------------------------------------
Financing activities:
Principal payment on long-term debt (392) (344)
Issuance of common shares 14,118 16,004
Repurchase of common shares (Note 12) - (22,100)
Proceeds from sale of treasury stock 9 -
---------------------------------------------------------------------
13,735 (6,440)
---------------------------------------------------------------------
Investing activities:
Purchase of short-term investments (476) -
Maturity of short-term investments - 49,784
Additions to capital assets (6,223) (2,583)
Proceeds from sale of long-lived assets (Note 8) - 2,489
Acquisitions, net of cash acquired (Note 3) (3,088) (2,069)
---------------------------------------------------------------------
(9,787) 47,621
---------------------------------------------------------------------
Foreign exchange gain on cash held in
foreign currency 379 595
---------------------------------------------------------------------
Increase in cash and cash equivalents 71,224 79,072
Cash and cash equivalents - beginning of
period 446,808 300,905
---------------------------------------------------------------------
Cash and cash equivalents - end of period 518,032 379,977
Short-term investments 102,584 -
---------------------------------------------------------------------
Cash position - end of period $ 620,616 $ 379,977
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplemental cash flow information (Note 10)
See accompanying notes to unaudited interim 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, 2004.
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2004
(Unaudited)
E[acute accent]The principal business activities of ATI Technologies Inc. (the "Company") are the design, manufacture and sale of innovative 3D graphics and digital media silicon solutions. The Company markets its products to original equipment manufacturers, system builders  This article's grammar usage needs improvement. Please edit this article in accordance with Wikipedia's . , 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 the 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). region.E[acute accent]1. SIGNIFICANT ACCOUNTING POLICIES E[acute accent]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. Certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. to include only the notes related to elements which have significantly changed in the interim period. As a result, these interim consolidated financial statements do not contain all disclosures required to be included in the annual financial statements and should be read in conjunction with the most recent audited annual consolidated financial statements and notes 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. for the year ended August 31, 2004. E[acute accent]These consolidated condensed financial statements are prepared following accounting policies consistent with the Company's audited annual consolidated financial statements and notes thereto for the year ended August 31, 2004, except for the following accounting policy adopted during the fiscal quarter ended November 30, 2004: E[acute accent](a) Effective September 1, 2004, the Company adopted the revised CICA Handbook Section 3870, "Stock-based Compensation and Other Stock-based Payments" which requires the application of a fair value method of accounting to all stock-based compensation payments to employees. As a result, the Company is required to estimate the fair value of the stock options granted and expense the fair value over the service period of the stock options. In accordance with the transitional provisions of Section 3870, the Company has retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin applied the fair value method of accounting for stock option awards granted since September 1, 2002 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 , and record an adjustment to opening retained earnings at September 1, 2004, in the amount of $13.8 million, representing the stock option expense for fiscal 2003 and 2004. The offset to retained earnings is an increase in contributed surplus and future income tax assets in the amounts of $17.5 million and $3.7 million respectively. The stock option expense for the three months ended November 30, 2004 was $8.0 million. E[acute accent]The following table reports the 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 amounts, including stock-based compensation expense, based on stock options issued subsequent to September 1, 2002 for the three months ended November 30, 2003. (Thousands of US dollars, except per share amount) --------------------------------------------------------------------- Net income: As reported $ 47,439 Pro forma 45,937 Basic net income per share: As reported $ 0.20 Pro forma 0.19 Diluted net income per share: As reported $ 0.19 Pro forma 0.18 --------------------------------------------------------------------- E[acute accent]The financial information included herein reflects all adjustments (consisting only of normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. adjustments), which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the three months ended November 30, 2004 is not necessarily indicative indicative: see mood. of the results to be expected for the full year. E[acute accent]2. FINANCIAL INSTRUMENTS E[acute accent]The Company enters into forward foreign exchange contracts ("Forwards") to hedge its foreign currency exposure on expenses incurred for its Canadian operations. The Forwards obligate obligate /ob·li·gate/ (ob´li-gat) pertaining to or characterized by the ability to survive only in a particular environment or to assume only a particular role, as an obligate anaerobe. the Company to sell US dollars for Canadian dollars in the future at predetermined pre·de·ter·mine v. pre·de·ter·mined, pre·de·ter·min·ing, pre·de·ter·mines v.tr. 1. To determine, decide, or establish in advance: exchange rates and are matched with anticipated future operating expenses in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . The Forwards do not subject the Company to risk from exchange rate movements because gains and losses on such contracts offset losses and gains on exposures being hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. . The counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. to the Forwards are multinational multinational Of, relating to, or being a company with subsidiaries or other operations in a number of countries. The diversity of operations of such companies subjects them to unique risks (for example, exchange rate changes or government nationalization) commercial banks and, therefore, the credit risk of counterparty Counterparty The other participant, including intermediaries, in a swap or contract. non-performance is low. E[acute accent]At November 30, 2004, there were no Forwards outstanding. On December 10, 2004, the Company purchased Forwards to buy Canadian $38.0 million in the next three months at an average rate of 1.2249. E[acute accent]3. ACQUISITIONS E[acute accent](i) On September 1, 2004, the Company acquired certain assets of RT&C International ("RT&C), its sales organization for South Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. , for cash consideration of $1.3 million. The purchase price was allocated to the net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. acquired, comprising of intangible assets of $1.3 million and 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. of $37,000, based on their relative fair values at the date of acquisition. The useful life of the intangible assets acquired is approximately 16 months. E[acute accent]Under the terms of the agreement, RT&C is eligible to receive cash consideration up to $1.5 million, contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent RT&C achieving future performance targets within one year after the closing date. As at November 30, 2004, there were no awards earned or recognized. This contingency contingency n. an event that might not occur. will be recorded when resolved, beyond a reasonable doubt. E[acute accent](ii) On September 2, 2003, the Company acquired certain assets from AMI Technologies Corp., its exclusive sales organization for Taiwan Taiwan (tī`wän`), Portuguese Formosa, officially Republic of China, island nation (2005 est. pop. 22,894,000), 13,885 sq mi (35,961 sq km), in the Pacific Ocean, separated from the mainland of S China by the 100-mi-wide (161-km) Taiwan and China since 1992, for cash consideration of $3.1 million. The purchase price was allocated to the net assets acquired, including intangible assets of $2.9 million, based on their relative fair values at the date of acquisition. The useful life of the intangible assets acquired is approximately one year. E[acute accent]On September 30, 2004, the Company acquired the remaining assets located in Taiwan and China from AMI Technologies Corp. for cash consideration of $1.6 million. The purchase price was allocated to the net assets acquired, comprising of intangible assets of $1.6 million and other assets of $12,000, based on their relative fair values at the date of acquisition. The useful life of the intangible assets acquired is approximately one year. E[acute accent]4. INTANGIBLE ASSETS AND GOODWILL E[acute accent]The net book values of intangible assets and goodwill at November 30, 2004 and August 31, 2004 are as follows :
(Thousands of US dollars)
---------------------------------------------------------------------
Net
Accumulated book
amortization Net value
November 30, book August 31,
Cost 2004 value 2004
---------------------------------------------------------------------
Core technology $ 23,670 $ 18,850 $ 4,820 $ 5,558
Other 5,775 3,368 2,407 -
---------------------------------------------------------------------
Total intangible
assets $ 29,445 $ 22,218 $ 7,227 $ 5,558
---------------------------------------------------------------------
---------------------------------------------------------------------
Goodwill $ 376,788 $ 186,693 $ 190,095 $ 190,095
---------------------------------------------------------------------
---------------------------------------------------------------------
E[acute accent]Amortization expense related to intangible assets amounted to $1.2 million for the three months ended November 30, 2004 (2004 - $1.5 million). E[acute accent]5. CREDIT FACILITIES credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities E[acute accent]The Company maintains committed operating credit facilities aggregating $46.3 million with a single financial institution. There are no borrowings outstanding under these facilities.
6. LONG-TERM DEBT
(Thousands of US dollars)
---------------------------------------------------------------------
Interest November 30 August 31
rate 2004 2004
---------------------------------------------------------------------
Obligation under capital
lease (i) 6.31% $ 19,690 $ 18,049
Mortgage payable (ii) 6.96% 12,543 11,575
---------------------------------------------------------------------
32,233 29,624
Less : Current portion 1,761 1,571
---------------------------------------------------------------------
Long-term portion $ 30,472 $ 28,053
---------------------------------------------------------------------
---------------------------------------------------------------------
E[acute accent](i) Obligation under capital lease : E[acute accent]The Company's obligation under capital lease represents the lease on the building facility occupied oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. by the Company in Markham, Ontario ("Building Facility"). The capital lease is denominated in Canadian dollars. As at November 30, 2004, the remaining amount outstanding on the capital lease was $19.7 million (Cdn. $23.4 million). E[acute accent](ii) Mortgage payable : E[acute accent]On September 10, 2002, 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) "), a joint venture in which the Company has a 50 per cent ownership interest, entered into a mortgage agreement with a lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. to finance the Building Facility. 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 as at November 30, 2004 amounted to $12.5 million (Cdn. $14.9 million). 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 and is denominated in Canadian dollars. E[acute accent]7. GUARANTEE E[acute accent]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 on the Building Facility. 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 under this guarantee. E[acute accent]In addition, the Company posted a letter of credit in the amount of $2.5 million (Cdn. $3.0 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 to 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.
8. OTHER CHARGES
Other charges include the following items:
(Thousands of US dollars)
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Regulatory matters (i) $ 382 $ 711
Restructuring charge (recovery) - European - (538)
---------------------------------------------------------------------
Total $ 382 $ 173
---------------------------------------------------------------------
E[acute accent](i) Regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters: E[acute accent]In January January: see month. 2003, the Company announced that Staff of the Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. ("OSC O.S.C. n. short for Order to Show Cause. (See: Order to Show Cause) ") had filed a Notice of Hearing and Statement of Allegations ("Notice") in relation to the Company and others. The Notice alleged that the Company failed to disclose information concerning the shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. in revenues and earnings that occurred in the third quarter of fiscal 2000, as required by the listing rules of the Toronto Stock Exchange. The Notice also alleged that the Company made a misleading statement to Staff of the OSC in August 2000 regarding the events leading up to the disclosure on May 24, 2000 of the shortfall. Seven individuals were also named in the Notice. The Notice alleged that six of these individuals, including K.Y. Ho, the Chairman and then Chief Executive Officer of the Company, engaged in insider In the context of federal regulation of the purchase and sale of Securities, anyone who has knowledge of facts not available to the general public. Insider information trading contrary to the Securities Act. The hearing originally set for February February: see month. - March 2004 has been rescheduled to March - June June: see month. 2005. E[acute accent](ii) Restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. (recovery) - European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations: E[acute accent]The following table details the activity through the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). liabilities accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. :
(Thousands of US dollars)
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Balance, beginning of period $ 18 $ 4,246
Cash payments (14) (3,237)
---------------------------------------------------------------------
Balance, end of period $ 4 $ 1,009
---------------------------------------------------------------------
---------------------------------------------------------------------
E[acute accent](a) During the second quarter of fiscal 2003, the Company announced the closure of ATI Technologies (Europe) Limited ("ATEL"), its subsidiary in Dublin Dublin, city, Republic of Ireland Dublin, Irish Baile Átha Cliath, county borough (1991 pop. 915,516), Leinster, capital of the Republic of Ireland, on Dublin Bay at the mouth of the Liffey River. , Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. and recorded a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $2.8 million. The charge included a $1.4 million write-down of the building facility, to estimated fair value less cost to sell. The Company completed the major components of the exit plan for ATEL in July July: see month. 2003. E[acute accent]During the first quarter of fiscal 2004, the Company was able to sell the building facility at a higher price than originally estimated resulting in a recovery of $0.5 million from the restructuring charge. The Company also paid out the remaining cash portion of the restructuring charge of $0.5 million during the same quarter. E[acute accent](b) During the fourth quarter of fiscal 2003, the Company decided to discontinue 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: the operations of ATI Research GmbH GmbH Gesellschaft mit Beschränkter Haftung (German: limited liability company; business entity) , its FireGL product division located in Starnberg, Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , in order to consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. its research and development activities. As a result, the Company recorded a pre-tax charge of $3.8 million for the quarter 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 the closure of ATI Research GmbH. The Company completed the major components of its exit plan for ATI Research GmbH in December 2003. E[acute accent]9. NET INCOME PER SHARE E[acute accent]The following table presents a reconciliation of the numerators and denominators used in the calculations of the basic and diluted net income per share:
(Thousands of US dollars, except per share amounts)
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Net income $ 63,703 $ 47,439
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average number of common shares
outstanding (000's):
Basic 249,027 242,998
Effect of dilutive securities 8,445 11,111
---------------------------------------------------------------------
Diluted 257,472 254,109
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per share
Basic $ 0.26 $ 0.20
Diluted $ 0.25 $ 0.19
---------------------------------------------------------------------
---------------------------------------------------------------------
E[acute accent]At November 30, 2004, options to purchase 5,640,806 (2004 - 4,869,994) shares of common stock were outstanding but were not included in the calculation of diluted net income per share because to do so would have been anti-dilutive. E[acute accent]10. SUPPLEMENTAL CASH FLOW INFORMATION
(Thousands of US dollars)
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Cash paid for:
Interest $ 489 $ 484
Income taxes 250 243
Interest received $ 1,915 $ 1,012
---------------------------------------------------------------------
E[acute accent]11. SEGMENTED INFORMATION E[acute accent]ATI designs and manufactures innovative 3D graphics and digital media silicon solutions. The Company has determined in the three month period ended November 30, 2004 that it operates in two reportable segments: Personal Computer (PC) and Consumer. The PC segment includes all 3D graphics, video, and multimedia products which are developed for use in desktop and notebook personal computers. The Consumer segment includes products used in cell phones, PDA's, DTV's, and set-top boxes The cable TV box that sits on "top" of the TV "set," although it is often located several feet away in an equipment rack. The set-top box descrambles the premium channels and provides a tuner for the higher cable numbers that very old TVs did not support. . The Consumer segment also includes royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. and contract engineering services derived from cell phone and game console products. Previously, the Company reported as a single reportable segment. E[acute accent]The Company's management evaluates segment performance based on revenue and on operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. which is calculated as income or loss from operations before taxes excluding expenses related to stock-based compensation, amortization of intangible assets, and other charges. E[acute accent]The Company does not identify or allocate To reserve a resource such as memory or disk. See memory allocation. fixed assets by reportable segment. In addition, there are no inter-segment revenues. The accounting policies for all operating segments are the same as those described in the summary of significant accounting policies. E[acute accent]The following table presents the revenues and operating income of the two reportable segments for the three months ended November 30, 2004 and 2003.
(Thousands of US dollars)
---------------------------------------------------------------------
Consolidated PC Consumer
Three months Three months Three months
ended ended ended
November 30 November 30 November 30
2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------
Revenues $ 613,859 $ 469,705 $ 518,317 $ 425,406 $ 95,542 $ 44,299
Operating
income 89,935 62,727 68,329 61,971 21,606 756
---------------------------------------------------------------------
E[acute accent]The following tables provide revenues by geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. area, 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. The breakdown in revenues by geographic area in the following table is based on customer and royalty payer location, whereas the breakdown in capital assets, intangible assets and goodwill is based on physical location.
(Thousands of US dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Revenues:
Canada $ 4,331 $ 6,293
United States 79,801 49,478
Europe 21,118 40,283
Asia-Pacific 508,609 373,651
---------------------------------------------------------------------
Consolidated revenues $ 613,859 $ 469,705
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
November 30 August 31
2004 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital assets, intangible assets
and goodwill:
Canada $ 75,210 $ 73,863
United States 205,482 206,147
Europe 191 165
Asia-Pacific 3,960 1,421
---------------------------------------------------------------------
Consolidated capital assets, intangible
assets and goodwill $ 284,843 $ 281,596
---------------------------------------------------------------------
---------------------------------------------------------------------
E[acute accent]12. STOCK-BASED COMPENSATION E[acute accent](i) Stock options E[acute accent]The weighted average estimated fair value at the date of grant for the stock options granted within the three months ended November 30, 2004 and November 30, 2003 was $9.14 and $8.34 per share respectively. The "fair value" of each option granted was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Risk-free interest rate 3.6% 3.4%
Dividend yield 0.0% 0.0%
Volatility factor of the expected market price
of the Company's common shares 65.5% 72.6%
Expected life of the options 4.1 years 4.2 years
---------------------------------------------------------------------
E[acute accent]The estimated fair value of the stock options is amortized to expense on a straight line basis 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 and the related expense for the three months end November 30, 2004 amounted to $8.0 million. The stock option expense by functional areas is as follows:
(Thousands of US dollars)
----------------------------------------------------------------
----------------------------------------------------------------
Three months ended
November 30, 2004
----------------------------------------------------------------
----------------------------------------------------------------
Selling and marketing $ 1,595
Research and development 5,268
Administrative 1,186
----------------------------------------------------------------
$ 8,049
----------------------------------------------------------------
----------------------------------------------------------------
E[acute accent](ii) Restricted share units E[acute accent]During the first quarter of fiscal 2004, the Company adopted a plan to grant restricted share units ("RSUs") to certain employees as part of its overall stock-based compensation plan. Under the terms of the plan, RSUs vest on each anniversary of the grant in equal one-third instalments over a period of three years. During the three months ended November 30, 2003, the Company advanced $22.1 million to the trustee to purchase the Company's common shares in the open market. The cost of the purchase of these shares is classified as treasury stock and presented as a reduction of shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. in the Company's consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . In October October: see month. 2004, 503,903 RSUs vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) and were settled by delivery of common shares of the Company to the participants or by cash equivalent to its market value on the vesting date. As at November 30, 2004, there were 1,001,087 RSUs awarded and outstanding. E[acute accent]RSU RSU Restricted Stock Unit RSU Rogers State University (Claremore, Oklahoma) RSU Rifiuti Solidi Urbani (Italiano) RSU Rappresentanza Sindacale Unitaria (Italian Group of Unions) expense by functional areas incurred for the three months ended November 30, 2004 and 2003, excluding the one-time cash payment of $7.8 million made in the first quarter of fiscal 2004 to the non-executive employees who were eligible for the RSU plan, are summarized in the following table:
(Thousands of US dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
---------------------------------------------------------------------
Selling and marketing $ 383 $ 116
Research and development 1,279 515
Administrative 279 120
---------------------------------------------------------------------
$ 1,941 $ 751
---------------------------------------------------------------------
---------------------------------------------------------------------
E[acute accent](iii) Deferred share units E[acute accent]During the second quarter of fiscal 2004, the Company established a plan to grant deferred share units ("DSUs") to its non-management directors. As at November 30, 2004, there were 92,082 DSUs outstanding of which 85,311 were vested (2004 - nil). E[acute accent]The expenses for three months ended November 30, 2004 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc DSUs granted to the directors for services rendered were $0.6 million (2004 - nil). E[acute accent]13. U.S. GAAP E[acute accent]The following table reconciles the net income as reported on the consolidated statements of operations and retained earnings prepared in accordance with Canadian GAAP to the consolidated net income that would have been reported had the financial statements been prepared in accordance with U.S. GAAP:
(Thousands of US dollars, except per share amounts)
---------------------------------------------------------------------
Three months ended
November 30
2004 2003
---------------------------------------------------------------------
Net income in accordance with Canadian GAAP $ 63,703 $ 47,439
Tax effect of stock options exercised (2,353) (2,230)
Expenses related to stock options,
net of taxes (i) 7,649 -
Stock-compensation expenses (ii), (iii)
compensation expenses (i), (ii) (6,812) (2,879)
Other 28 28
---------------------------------------------------------------------
Net income in accordance with U.S. GAAP $ 62,215 $ 42,358
---------------------------------------------------------------------
Net income per share:
Basic $ 0.25 $ 0.17
Diluted $ 0.24 $ 0.17
---------------------------------------------------------------------
Weighted average number of shares (000's):
Basic 249,027 242,998
Diluted 257,472 254,109
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E[acute accent](i) Under Canadian GAAP, effective September 1, 2004, the Company adopted the fair value method of recognizing stock-based compensation. For U.S. GAAP purposes, the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method is used to account for stock-based compensation for employees. Compensation expense of $7.6 million, net of taxes recognized under Canadian GAAP would not be recognized under U.S. GAAP for the three months ended November 30, 2004. The exercise price of stock options is equal to the market value of the underlying shares at the date of grant, therefore there is no expense under the intrinsic value method for U.S. GAAP purposes for the three months ended November 30, 2004 and 2003. E[acute accent](ii) Under U.S. GAAP, options granted after January 18, 2001 with an exercise price denominated in a currency other than the currency of the primary economic environment of either the employer or the employee, should be accounted for under the variable accounting method. Under Canadian GAAP, there is no equivalent requirement. There were no such options granted after February 28, 2002. E[acute accent](iii) Under U.S. GAAP, the intrinsic value of the stock options issued under an incentive plan entered into in July 2002 is calculated as the increase in the Company's stock price between the grant date and the date on which all the conditions of the specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. business arrangement were determined to have been met. The compensation expense is recognized over the vesting period of the options. Under Canadian GAAP, there is no equivalent requirement. E[acute accent]14. COMPARATIVE INFORMATION E[acute accent]The company has reclassified certain prior period information to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current period presentation. |
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