ATI Technologies Inc. Announces Third Quarter Results.Business Editors TORONTO--(BUSINESS WIRE)--June 29, 2000 Company Reports a Loss of Ten Cents Ten Cents has several meanings:
Adjusted Basis Production Shipments of New RADEON See ATI. (TM) Chip to Commence in July July: see month. 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. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :ATY ATY Air Textured Yarn (textile) ATY Watertown, SD, USA (Airport Code) ATY After-Tax Yield .) (Nasdaq:ATYT ATYT ATI Technologies, Inc (stock symbol) ) the world's largest supplier of 3D graphics and multimedia technology, today reported lower revenues and a loss for the third quarter ending May 31, 2000. Preliminary estimates of the third quarter results were previously announced in the Company's press release issued on May 24, 2000. The Company said market conditions will continue to put pressure on results in the short term; however, it plans volume shipments of the new RADEON product, the world's most powerful graphics chip, to commence in July. Sales for the three months ended May 31, 2000 were $288.2 million, a decrease of 4.6% from $302.0 million for the same period last year. Adjusted net income for the third quarter, which excludes the amortization of purchased in-process research and development costs and other acquired intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and special charges as discussed below, declined to a loss of $23.1 million or ten cents per share compared with earnings of $35.9 million or 17 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. for the same period last year (see Note 2). All amounts are expressed 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. On April 5, 2000 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. completed the acquisition of ArtX ARTX Ada Real-Time Executive , Inc., a leading developer of high-performance Adj. 1. high-performance - modified to give superior performance; "a high-performance car" superior - of high or superior quality or performance; "superior wisdom derived from experience"; "superior math students" graphics for PC's and consumer appliances, for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $453 million. As a result, the Company took a charge in the third quarter of $20.3 million for the amortization of purchased in-process R&D and other intangibles related to its purchase of ArtX. In addition, amortization of intangibles relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a previous acquisition totaled $0.9 million. During the quarter, the Company also made a special provision for excess and slow-moving Adj. 1. slow-moving - moving slowly; "slow-moving cars" slow - not moving quickly; taking a comparatively long time; "a slow walker"; "the slow lane of traffic"; "her steps were slow"; "he was slow in reacting to the news"; "slow but steady growth" inventory of $64 million. Selling and marketing costs include a $24 million special charge for programs and incentives provided to customers in order to stimulate stimulate /stim·u·late/ (stim´u-lat) to excite functional activity. stim·u·late v. To arouse a body or a responsive structure to increased functional activity. demand for the Company's older and slow-moving product lines. To reflect ongoing operations on a normalized basis, these amounts have been excluded from adjusted net losses and adjusted net losses per share. Actual net losses for the third quarter, including the above-mentioned A`bove´-men`tioned a. 1. Mentioned or named before; aforesaid; mentioned or named earlier in the same text (in written documents). Adj. 1. special items, were $128.8 million or 58 cents per share, compared with net income of $18.6 million or nine cents per share for the same period last year. "The Company's third quarter results are unacceptable to management and to the Board of Directors," said KY Ho, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , ATI Technologies Inc. "But we are pleased with the initial performance and acceptance of our RADEON chip by OEMs. This will provide a solid foundation for improved financial performance, and combined with a focus on our cost structure and operating procedures, will restore the Company to profitability." Financial Highlights During the quarter, sales were adversely affected by a severely constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. supply of components to the computer industry, including such items as CPUs, DVDs and capacitors. This caused particular hardships to system builders  This article's grammar usage needs improvement. Please edit this article in accordance with Wikipedia's . as component suppliers preferentially pref·er·en·tial adj. 1. Of, relating to, or giving advantage or preference: preferential treatment. 2. allocated parts to their top tier accounts. System builders comprise a major portion of ATI's European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. sales where the effects of shortages were particularly pronounced. Compounding the Company's revenue and earnings 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. was the action of newly-consolidated 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. who moved to exceptionally aggressive pricing levels to clear out inventories of graphics boards. At the same time, the fiercely fierce adj. fierc·er, fierc·est 1. Having a savage and violent nature; ferocious. See Synonyms at cruel. 2. Extremely severe or violent; terrible: competitive market environment necessitated movement of the RAGE 128 PRO down to the mainstream segment faster than anticipated. The latter two factors caused gross margins to deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. significantly in the third quarter. Gross margins (excluding the special inventory write down of $64.0 million) were 19.6% of sales, compared with 33.2% in the second quarter of fiscal 2000. Total operating costs operating costs npl → gastos mpl operacionales (excluding acquisition amortization costs of $21.2 million and the special marketing charge of $24.3 million) in the third quarter increased year-over-year as a percentage of sales, to 30% or $87.6 million, compared with 21% or $63.5 for the third quarter of fiscal 1999. Total 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. increased over the prior year to support ATI's broad product line-up line-up Noun 1. people or things assembled for a particular purpose: Christmas TV line-up 2. and multiple business segments as well as the addition of the ArtX development team. For the third quarter, the Company's cash position (defined as cash and cash equivalents and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments less bank indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. ) decreased after operating, financing and investing activities to $132.1 million, down from $143.5 million in the previous quarter. During the quarter, working capital decreased from $402.8 million at the end of the second quarter to $298.4 million at the end of the third quarter of fiscal 2000. "The Company views the third quarter loss very seriously," said Dave 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 COO (Cell Of Origin) See mobile positioning. , ATI Technologies Inc. "We remain strong in 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 and retail sales, number one in mobile graphics and anticipate significant new business with our new high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. RADEON graphics processor, 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 and set-top products. With the improved operational efficiencies that we are spearheading and the quick production ramp of RADEON we will return ATI to 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 long history of profitability." Operational Highlights During the quarter the Company strengthened its position in its core desktop graphics business. Continuing a long-established OEM relationship, the Company announced a design win for the RAGE 128 PRO(TM) graphics chip with the latest top-of-the-line Gateway 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 series. ATI also signaled the Company's vigorous push into the high-end PC and 3D workstation market segments with the announcement of RADEON, the world's most powerful and feature-packed graphics processor. The Company also finalized See finalization. its acquisition of ArtX, Inc., to enable ATI to offer the industry's only complete range of desktop graphics solutions, with the development of ATI's first integrated graphics part that will ship to customers during the Company's fourth quarter. At the same time the Company continued to capture the majority of the notebook See notebook computer. 1. (computer) notebook - laptop computer. 2. (tool) notebook - Labtech Notebook. PC design wins awarded during the quarter. New to ATI's list of notebook OEM customers was Legend, the leading notebook PC manufacturer in the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China. RAGE MOBILITY(TM) design wins were also announced with a continuing roster of customers, including HP, Compaq (Compaq Computer Corporation, Houston, TX, www.compaq.com) Compaq was the leading PC manufacturer when it was acquired by HP in 2002. Founded in 1982 by Rod Canion, Jim Harris and Bill Murto, one year later the company shipped 53,000 PC-compatible COMPAQ Portables, resulting in $111 , IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) , Micron and Dell. This design win success led to ATI's announcement that in excess of five million RAGE MOBILITY chips have now been sold, and a million units are being shipped to worldwide customers each month. During the quarter ATI also deepened its convergence expertise. Among other developments, ATI announced new personal video technology enabling time-shifting and including an interactive program guide. ATI also joined the TV Anytime Forum to ensure the Company had a direct say in the development of standards that will guide the mass-market mass-mar·ket adj. Of, relating to, or produced for consumption in large numbers, especially when sold in supermarkets, in drugstores, and at newstands: a mass-market paperback. tr.v. adoption of interactive television. This press release contains 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. that involve risks and uncertainties. Actual results may be materially different from those contained in such forward-looking statements. 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 rapidly changing technology, evolving industry standards, frequent new product introductions, emerging competitors and significant price competition. In the event that the Company is unsuccessful in identifying, developing, manufacturing or marketing competitive new products or enhancing its existing products or maintaining its historic prices or margins, its operating results will be adversely affected. Additional information concerning factors that could cause actual results to materially differ from those in such forward-looking statements is contained in the Company's filings with 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 . About ATI ATI Technologies Inc., the world's largest supplier of 3D graphics and multimedia technology, designs, manufactures and markets innovative and award-winning Adj. 1. award-winning - having received awards; "this award-winning bridge spans a distance of five miles" multimedia solutions and graphics components for the personal computer, set-top box 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. and consumer electronics appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. markets. An ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9002 Company, ATI is the world's leading supplier of video and 2D/3D graphics accelerators A display adapter that performs a specialized set of graphics functions to render an image on screen. Today, all display adapters provide basic rendering functions in hardware, but many have graphics processing units (GPUs) that are sophisticated computers. . Founded in l985, ATI employs more than 1,900 people at headquarters in Thornhill, Ontario Thornhill (2006 population 106,394) is an upscale community in Ontario, Canada, directly north of Toronto. It is considered the most affluent of Toronto suburbs. It straddles two municipalities, the city of Vaughan having the portion west of Yonge Street and the town of Markham , and in offices in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , 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). , France, the United Kingdom, 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. , Barbados Barbados (bärbā`dōz), island state (2005 est. pop. 279,300), 166 sq mi (430 sq km), in the West Indies. The capital and largest city is Bridgetown. Land, People, and Economy The island, E of St. , Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. , Japan and Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. . ATI is a public Company whose shares trade on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. and NASDAQ. Until July 5, 2000 replays of the Company's conference call reviewing this announcement will be available at approximately 12:00 pm EST EST electroshock therapy. EST abbr. electroshock therapy by calling (416)-695-5800, passcode number 498343. The conference call is also available on the Q1234.com website. For other ATI news releases visit our web site at http://www.ati.com. Copyright 2000 ATI Technologies Inc. All Company 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. product names are trademarks and/or registered trademarks of their respective manufacturers. Features, pricing, availability and specifications are subject to change without notice.
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of US dollars, except per share amounts)
Three months ended
May 31 May 31
2000 1999
---------------------------------------------------------------
(unaudited)
Sales $288,212 100.0% $302,039 100.0%
Cost of goods sold (Note 1) 295,650 102.6% 190,153 63.0%
---------------------------------------------------------------
(7,438) (2.6)% 111,886 37.0%
Expenses
Selling and marketing (Note 1) 67,430 23.4% 28,076 9.3%
Research and development 37,284 12.9% 27,703 9.2%
Administrative 6,844 2.4% 7,750 2.6%
Amortization of intangible
assets 21,223 7.4% 17,320 5.7%
---------------------------------------------------------------
132,781 46.1% 80,849 26.8%
---------------------------------------------------------------
Income (loss) from operations (140,219) (48.7)% 31,037 10.2%
Interest and other income 1,427 0.5% 223 0.1%
Gain on sale of long-term investments - - - -
Interest expense (32) - (42) -
---------------------------------------------------------------
Income (loss) before income
taxes (138,824) (48.2)% 31,218 10.3%
Income taxes (10,038) (3.5)% 12,640 4.2%
---------------------------------------------------------------
Net income (loss) $(128,786) (44.7)% $18,578 6.1%
---------------------------------------------------------------
Net income per share
Basic ($0.58) $0.09
Fully diluted ($0.58) $0.09
---------------------------------------------------------------
Weighted average number of shares (000's)
Basic 221,092 202,485
Fully diluted 221,092 220,786
Outstanding number of shares at
the end of the quarter (000's) 228,793 202,951
---------------------------------------------------------------
See accompanying notes to consolidated financial statements
ADJUSTED NET INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS) PER
SHARE (Note 2)
(Thousands of US dollars, except per share amounts)
Adjusted net income (loss) $(23,148) $35,898
Adjusted net income (loss) per share
Basic ($0.10) $0.18
Fully diluted ($0.10) $0.17
---------------------------------------------------------------
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of US dollars, except per share amounts)
Nine months ended
May 31 May 31
2000 1999
---------------------------------------------------------------
(unaudited)
Sales $1,081,799 100.0% $926,607 100.0%
Cost of goods sold (Note 1) 822,047 76.0% 585,582 63.2%
---------------------------------------------------------------
259,752 24.0% 341,025 36.8%
Expenses
Selling and marketing (Note 1) 140,257 13.0% 77,556 8.4%
Research and development 95,239 8.8% 71,308 7.7%
Administrative 20,801 1.9% 22,792 2.5%
Amortization of
intangible assets 22,997 2.1% 36,565 3.9%
---------------------------------------------------------------
279,294 25.8% 208,221 22.5%
---------------------------------------------------------------
Income (loss) from operations (19,542) (1.8)% 132,804 14.3%
Interest and other income 3,996 0.3% 2,511 0.3%
Gain on sale of long-term
investments 10,666 1.0% - -
Interest expense (81) - (330) -
---------------------------------------------------------------
Income (loss) before
income taxes (4,961) (0.5)% 134,985 14.6%
Income taxes 19,165 1.7% 44,623 4.8%
---------------------------------------------------------------
Net income (loss) $(24,126) (2.2)% $90,362 9.8%
---------------------------------------------------------------
Net income per share
Basic ($0.11) $0.45
Fully diluted ($0.11) $0.42
---------------------------------------------------------------
Weighted average number of shares (000's)
Basic 210,420 200,951
Fully diluted 210,420 219,728
Outstanding number of shares at
the end of the quarter (000's) 228,793 202,951
---------------------------------------------------------------
See accompanying notes to consolidated financial statements
ADJUSTED NET INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS) PER
SHARE (Note 2)
(Thousands of US dollars, except per share amounts)
Adjusted net income (loss) $76,140 $126,927
Adjusted net income (loss) per share
Basic $0.36 $0.63
Fully diluted $0.35 $0.58
---------------------------------------------------------------
ATI TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Thousands of US dollars)
May 31 May 31
2000 1999
----------------------------------------------------------------
(unaudited)
Assets
Current Assets
Cash and cash equivalents $ 127,722 $ 90,012
Short-term investments 4,417 10,000
Accounts receivable 186,397 165,461
Inventories 222,985 185,126
Prepayments and sundry receivables 23,664 17,070
----------------------------------------------------------------
Total current assets 565,185 467,669
Capital assets 64,968 53,693
Intangible assets 443,122 34,304
Long-term investments 12,556 6,375
----------------------------------------------------------------
Total Assets $ 1,085,831 $ 562,041
===============================================================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 183,158 112,379
Accrued liabilities 66,973 59,360
Deferred revenue 5,353 -
Income taxes payable 11,271 28,393
----------------------------------------------------------------
Total current liabilities 266,755 200,132
Deferred income taxes 10,100 6,800
Shareholders' Equity
Share capital 555,538 87,806
Retained earnings 245,164 259,029
Currency translation adjustment 8,274 8,274
----------------------------------------------------------------
Total shareholders' equity 808,976 355,109
----------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 1,085,831 $ 562,041
================================================================
See accompanying notes to consolidated financial statements
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of US dollars)
Three months ended Nine months ended
May 31 May 31
----------------------------------------------------------------
2000 1999 2000 1999
----------------------------------------------------------------
(unaudited) (unaudited)
Cash provided by (used in):
Operating activities:
Net income (loss) $ (128,786) $ 18,578$ (24,126) $ 90,362
Add items not affecting
working capital:
Deferred income taxes - 1,100 5,700 1,383
Depreciation 4,022 3,697 13,125 9,289
Amortization of
intangible assets 21,223 17,320 22,997 36,565
Gain on sale of long-term
investments - - (10,666) -
Foreign exchange (gain)
loss 240 (82) 239 (1,073)
Net changes in non-cash
working capital balances
relating to operations:
Accounts receivable 48,186 19,676 (7,216) (14,002)
Inventories (9,977) (66,774) (32,080) (71,458)
Prepayments and sundry
receivables (123) (310) (8,012) (4,366)
Accounts payable 33,711 7,386 70,994 9,454
Accrued liabilities 29,560 6,278 19,489 16,858
Deferred revenue 854 - 854 -
Income taxes payable (16,740) 1,169 (19,007) (1,211)
----------------------------------------------------------------
(17,830) 8,038 32,291 71,801
----------------------------------------------------------------
Financing activities:
Issuance of common shares 4,499 2,545 11,227 8,380
Common shares purchased
for cancellation - - (6,929) -
----------------------------------------------------------------
4,499 2,545 4,298 8,380
----------------------------------------------------------------
Investing activities:
(Purchase) maturity of
short-term investments (4,417) (10,000) 5,583 29,192
Additions to capital
assets (4,111) (9,616) (21,045) (24,865)
Investment in other
assets (4,413) (625) (4,413) (750)
Proceeds from sale of
long-term investments - 26,014 15,023 26,014
Acquisitions, net of
cash acquired 10,757 - 10,757 (25,549)
----------------------------------------------------------------
(2,184) 5,773 5,905 4,042
----------------------------------------------------------------
Foreign exchange gain (loss)
on cash held in foreign
currency (240) 82 (239) 1,073
Increase (decrease) in
cash (15,755) 16,438 42,255 85,296
Cash and cash equivalents
- beginning of period 143,477 73,574 85,467 4,716
----------------------------------------------------------------
Cash and cash equivalents
- end of period 127,722 90,012 127,722 90,012
Short-term investments 4,417 10,000 4,417 10,000
----------------------------------------------------------------
Cash position - end of
period $132,139 $100,012 $132,139 $100,012
================================================================
Cash position is defined as cash and cash equivalents and
short-term investments, net of bank indebtedness.
See accompanying notes to consolidated financial statements.
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
(unaudited)
1. SPECIAL CHARGES
Cost of goods sold includes a $64.0 million special charge for
excess inventory and lower of cost and market adjustments against
certain products in inventory. Selling and marketing includes a $24.3
million special charge for programs and incentives provided to
customers in order to stimulate demand for the Company's older and
slow-moving product lines.
2. ADJUSTED NET INCOME (LOSS) AND ADJUSTED NET INCOME (LOSS) PER
SHARE
The table below presents adjusted net income (loss) adjusted net
income (loss) per share, which excludes the after-tax effect of gain
on sale of long-term investments, amortization of intangible assets
related to the Company's acquisitions, and special charges.
Three months ended Nine months ended
May 31 May 31
(Thousands of US dollars,
except per share amounts) 2000 1999 2000 1999
----------------------------------------------------------------
(unaudited) (unaudited)
Net income (loss) $ (128,786) $ 18,578$ (24,126) $ 90,362
Gain on sale of long
-term investments - - (10,666) -
Amortization of
intangible assets 21,223 17,320 22,997 36,565
Inventory special
charge (note 1) 63,997 - 63,997 -
Selling and marketing
special charge (note 1) 24,303 - 24,303 -
Net tax impact (3,885) - (365) -
----------------------------------------------------------------
Adjusted net income
(loss) $ (23,148) $ 35,898 $ 76,140 $ 126,927
================================================================
Adjusted net income
(loss) per share
Basic ($ 0.10) $ 0.18 $ 0.36 $ 0.63
Fully diluted ($ 0.10) $ 0.17 $ 0.35 $ 0.58
================================================================
Weighted average number of shares (000's):
Basic 221,092 202,485 210,420 200,951
Fully diluted 221,092 220,786 228,154 219,728
================================================================
3. ACQUISITION
On April 4, 2000 the Company acquired all of the issued and
outstanding shares and options of ArtX, Inc. ("ArtX"), a
privately-held company based in Palo Alto, California, which designs
and develops graphics solutions for high-performance PCs and
e-appliances.
The acquisition resulted in the issue of approximately 21.5
million common shares and 7.0 million options of the Company. The
aggregate purchase price was approximately $453 million based on the
closing price of the Company's shares at the date of acquisition.
Furthermore, an additional 4.1 million common shares are issuable to
former ArtX shareholders should ArtX achieve certain milestones in the
future.
The acquisition was accounted for using the purchase method and
accordingly the purchase price has been allocated to the fair value of
the net assets acquired. The allocation of the purchase price was to
net tangible assets of $6 million, acquired core technology and
workforce of $19 million, purchased in-process research and
development of $51 million, and goodwill of $377 million. This
allocation is subject to adjustment and expected to be finalized by
the end of fiscal year 2000.
Purchased in-process research and development is being charged to
operations over a one-year period on a straight-line basis. Acquired
core technology, workforce and goodwill are being amortized over a
five-year period on a straight-line basis.
The operating results of ArtX have been included in the
consolidated statements of operations from the date of acquisition.
4. SEGMENTED INFORMATION
The Company operates in one operating segment, that being the
design, manufacture and sale of graphics and multimedia products for
personal computers and consumer electronics devices.
The following table provides sales by geographic area and by
product:
Three months ended Nine months ended
May 31 May 31
(Thousands of US dollars) 2000 1999 2000 1999
===============================================================
Sales:
Canada $ 7,261 $ 14,241 $ 33,551 $ 32,766
United States 104,131 111,858 357,888 319,660
Europe 72,537 97,282 343,262 335,875
Asia-Pacific 104,283 78,658 347,098 238,306
---------------------------------------------------------------
Consolidated sales $ 288,212 $ 302,039$ 1,081,799 $ 926,607
===============================================================
Product sales:
Components $ 122,012 $ 88,002 $ 404,434 $ 296,040
Boards 163,264 214,037 674,429 630,567
Other 2,936 - 2,936 -
---------------------------------------------------------------
Consolidated sales $ 288,212 $ 302,039$ 1,081,799 $ 926,607
===============================================================
5. 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:
Three months ended Nine months ended
May 31 May 31
(Thousands of US dollars,
except per share amounts) 2000 1999 2000 1999
---------------------------------------------------------------
(unaudited) (unaudited)
Net income (loss) in
accordance with Canadian GAAP
$ (128,786) $ 18,578 $ (24,126) $ 90,362
Adjustment to deferred
income taxes (80) (100) (60) (270)
Effect of deferral
accounting related
to foreign exchange
contracts
60 - (370) 1,460
Tax effect of stock
options exercised (1,514) - (3,114) -
Write-off of purchased
in-process research and
development (note a)
(50,950) - (50,950) (49,300)
Amortization of purchased in-process research and development (note a)
7,957 16,433 7,957 34,692
Amortization difference
between Canadian and U.S.
GAAP (note b)
1,211 - 1,211 -
---------------------------------------------------------------
Net income (loss) in accordance with U.S.
GAAP
$ (172,102) $ 34,911 $(69,452) $ 76,944
---------------------------------------------------------------
Net income (loss) per
share
Basic ($ 0.78) $ 0.17 ($ 0.33) $ 0.38
Diluted ($ 0.78) $ 0.16 ($ 0.33) $ 0.36
----------------------------------------------------------------
Weighted average number of shares (000's):
Basic 221,092 202,485 210,420 200,951
Diluted 221,092 213,990 210,420 211,351
----------------------------------------------------------------
(a) Under Canadian GAAP, purchased in-process research and
development is amortized over its estimated useful life and asset
recoverability is reviewed on an ongoing basis. Under U.S. GAAP,
purchased in-process research and development acquired by the Company
is written off at the time of acquisition.
(b) Under Canadian GAAP, the aggregate purchase price of ArtX was
approximately $453 million, which was based on the average closing
market price of the Company's common shares at the closing date of the
transaction and merger related costs. Under U.S. GAAP, the aggregate
purchase price of ArtX was approximately $414 million, which was based
on the average closing market price of the Company's common shares at
the date of the announcement of the transaction and merger related
costs.
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