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Discreet Logic announces second-quarter results.

MONTREAL--(BUSINESS WIRE)--March 7, 1996--Discreet Logic Inc. (NASDAQ NM:DSLGF) Thursday reported financial results for its second quarter, ended Jan. 31, 1996.

Net income for the 1996 second quarter was $775,000, or 3 cents per share. This compares with net income of $1.8 million, or 7 cents per share, for the same quarter in fiscal year 1995, a 57 percent decrease in net income.

Total revenues for the 1996 second quarter were $25.2 million, compared with total revenues of $13.7 million for the same quarter in fiscal year 1995, an increase of 84 percent. The increase in revenues was due to growth in FLAME and FLINT shipments, and continued shipments of INFERNO, FROST and VAPOUR, first shipped in the first quarter of 1996.

Net income for the six-month period ended Jan. 31, 1996, was $4.1 million, or 14 cents per share, excluding an $8.5 million write-off in the first quarter of purchased research and development resulting from the acquisition of Computer-und Serviceverwaltungs AG ("COSS") and certain assets of IMP Innovative Medientechnik-und Planungs-GmbH ("IMP").

This compares with net income of $3.3 million, or 13 cents per share, for the same six-month period in fiscal year 1995, a 24 percent increase in net income. The net loss for the 1996 six-month period was $4.4 million, or 17 cents per share, after the $8.5 million write-off.

Total revenues for the 1996 six-month period were $50.3 million, compared with total revenues of $24.8 million for the same six months in fiscal year 1995, an increase of 103 percent. The increase in revenues was due to growth in FLAME and FLINT shipments, and initial shipments of INFERNO, FROST and VAPOUR.

"As we discussed several weeks ago, we are disappointed with our financial results for our second fiscal quarter," said Richard Szalwinski, chairman, founder and acting CEO of the company. "Silicon Graphics Inc.'s (SGI) announcement of the Onyx InfiniteReality with a new graphics subsystem of the RealityEngine3, is expected to provide Discreet's products, FLAME, INFERNO and VAPOUR, with improved and faster performance."

"The timing of the announcement, coming close to the end of our quarter, disrupted our sales channel. However, we are excited about the opportunities provided by this new machine. Another recent SGI machine, the Indigo IMPACT, improves the performance and speed of the company's FLINT product.

"We are excited about the opportunities provided by these two new machines from SGI, however, delays in the availability of these two new machines, either for porting activities by the company or for sale to the company's customers, could have a negative impact on the company's future results of operations.

"Development of new products continues as a core strategy for the growth of Discreet Logic," said Szalwinski. "This strategy includes modifying our software to run on new workstations designed by our business partner, SGI, as well as new software and hardware products developed by the company. Our new virtual set technology has sold well since the acquisition of the technology in October 1995 but continued growth is necessary to help fuel the company's growth.

"In addition, the company believes that the scheduled release of the company's new non-linear video editing product, FIRE, will create additional growth opportunities in a new market area for the company. This product currently is expected to ship during the first half of this calendar year."

Except for the historical information contained herein, certain of the matters discussed in this news release may include forward looking statements that involve risks and uncertainties.

Actual results may vary significantly based on a number of factors, including the timely development and acceptance of new products, the impact of competitive products and pricing, the timely development and release of products by Silicon Graphics, the complexities of adapting the company's products to the recently announced SGI workstation, the company's ability to locate and retain senior management personnel and the other risks detailed in the company's Prospectus dated Nov. 14, 1995, particularly in the Risk Factors section.

Discreet Logic, based in Montreal, develops and supports non-linear, digital sound and image processing systems for creating, editing and compositing special effects for film, video, audio and broadcast. The company's systems are used by creative professionals for a variety of applications: feature films, television programs, television commercials, music videos, interactive game production and broadcasting.

Through direct contact with digital artists, audio engineers, production and broadcasting specialists, Discreet Logic offers technology designed to meet the present and future needs of content creators. -0-

Note to Editors: Discreet Logic, INFERNO, VAPOUR, FLAME, FLINT and FIRE are trademarks of Discreet Logic Inc. Silicon Graphics is a registered trademark of Silicon Graphics Inc. All other trademarks and registered trademarks are the property of their respective owners. -0-

 DISCREET LOGIC INC. AND SUBSIDIARIES
 SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
 (All amounts in thousands of U.S. dollars, except per-share data)
 (Unaudited)


 Three Months Ended
 Jan. 31,
 1996 1995


Total revenues $ 25,225 $ 13,734
Cost of revenues 13,752 6,099
 Gross profit 11,473 7,635


Operating expenses:
 Research & development 3,522 755
 Sales & marketing 6,153 2,961
 General and administrative 2,022 877
 Write-off of purchased R&D -- --
 Total operating expenses 11,697 4,593


Operating income/(loss) (224) 3,042


Other income (expenses) 1,495 94


Income before income taxes
 and minority interest 1,271 3,136


Provision for income taxes 496 1,317


Net income before minority interest 775 1,819


Minority interest -- 13


Net income $ 775 $ 1,806


Net income per common share 3 cents 7 cents


Weighted average common shares
 outstanding 29,146 25,082




 Six Months Ended
 Jan. 31,
 1996 1995


Total revenues $ 50,269 $ 24,750
Cost of revenues 24,316 11,620
 Gross profit 25,953 13,130


Operating expenses:
 Research & development 5,893 1,308
 Sales & marketing 11,586 4,287
 General and administrative 3,564 1,913
 Write-off of purchased R&D 8,500 --
 Total operating expenses 29,543 7,508


Operating income/(loss) (3,590) 5,622


Other income (expenses) 1,770 69


Income before income taxes
 and minority interest (1,820) 5,691


Provision for income taxes 2,613 2,390


Net income before minority interest (4,433) 3,301


Minority interest -- 15


Net income $ (4,433) $ 3,286


Net income per common share (17 cents) 13 cents


Weighted average common shares
 outstanding 26,165 24,994




 DISCREET LOGIC INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 (All amounts in thousands of U.S. dollars, except per-share data)


 Jan. 31, July 31,
 1996 1995
 (Unaudited)
ASSETS
Current Assets:
 Cash and cash equivalents $ 51,262 $ 40,987
 Accounts receivable 23,567 15,019
 Inventory
 Resale 5,865 6,361
 Demonstration 4,163 3,201
 Income taxes receivable 2,978 --
 Other current assets 2,483 1,752
 90,318 67,320


Property and equipment, net 12,694 6,759
Other assets 6,341 2,779
 $109,353 $ 76,858


LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Accounts payable and accrued expenses $ 23,397 $ 17,924
 Deferred revenue 4,511 3,808
 Income taxes payable -- 2,579
 Current portion of obligation under
 capital leases 44 250
 Customer deposits 769 811
 Due to related parties 81 101
 28,802 25,473
Deferred income taxes -- 1,261
 Total liabilities 28,802 26,734


Shareholders' equity:
 Common shares 78,264 43,232
 Retained earnings 3,825 8,258
 Share subscriptions receivable -- (1,645)
 Cumulative translation adjustment (1,538) 279
 Total shareholders' equity 80,551 50,124
 $109,353 $ 76,858


CONTACT: Discreet Logic Inc., Montreal

Leigh Pesqueira, 617/520-0164

Doug Johnson, 514/948-7085
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No portion of this article can be reproduced without the express written permission from the copyright holder.
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