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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of June, 2003
-------------------------------------
ATI TECHNOLOGIES INC.
---------------------
(Translation of Registrant's Name into English)
1 Commerce Valley Drive East, Markham, Ontario, Canada L3T 7X6
--------------------------------------------------------------
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F Form 40-F X
---------------- -----------------
(Indicate by check mark whether the registrant by furnishing
the information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.)
Yes No X
-------------- ---------------
Page 1 of Pages 28
Index is located on Page 2
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INDEX
Document Page Number
- -------- -----------
Press Release dated June 25, 2003 3
Signature Page 28
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[ATI Technologies Inc. LOGO]
ATI Reports Third Quarter Financial Results
Strong customer demand for RADEON-based products drive sales
Markham, Ontario -- June 25, 2003 -- ATI Technologies Inc. (TSX: ATY, NASDAQ:
ATYT), a world leader in the design and manufacture of innovative 3D graphics
and digital media silicon solutions, today announced its financial results for
the third quarter of its 2003 fiscal year, which ended May 31, 2003.
Revenues for the third quarter were $342.1(1) million compared to $318.5 million
in the second quarter of fiscal 2003. Gross margin was 32.9 per cent, rising 4.0
percentage points from 28.9 per cent in the second quarter. Operating expenses,
excluding amortization of intangible assets and other charges(2), increased $9.1
million to $89.4 million compared to the second quarter.
The net income for the third quarter was $12.4 million or $0.05 per share
compared to a net loss of $8.3 million or $0.04 for the second quarter of 2003
and a net loss of $2.0 million or $0.01 per share for the same period a year
ago. Adjusted net income(3) for the third quarter was $17.5 million or $0.07 per
share compared to $9.7 million or $0.04 per share for the previous quarter, and
$19.2 million or $0.08 per share for the same period a year ago.
(1)All dollar amounts are stated in U.S. dollars unless otherwise noted. All per
share amounts are stated on a diluted basis unless otherwise noted.
(2) The Company incurred other charges during the quarter that are not
considered to be part of the Company's normalized operations and in aggregate
represent $2.3 million. These charges arise out of matters relating to the
Ontario Securities Commission investigation. (See Note 7 to the consolidated
financial statements.)
(3)Adjusted net income excludes the after-tax effect of gain on investments,
after-tax effect of other charges described in Note 7 to the consolidated
financial statements, amortization of goodwill and intangible assets related to
the Company's acquisitions, and deferred tax recovery of future tax liability
pertaining to intangible assets acquired, related to the Company's acquisitions.
Each of these items has been excluded from adjusted net income as they are not
considered to be part of the Company's normalized operations. While the Company
recognizes that adjusted net income does not have any standardized meaning
described by generally accepted accounting principles, or GAAP, and that its
adjusted net income calculation cannot be used as a comparison to other
companies' financial performance, ATI believes that its adjusted net income more
appropriately reflects the Company's operating performance. Please see the table
titled "Adjusted Net Income - Reconciliation" in Management's Discussion and
Analysis of Interim Financial Results in this release for the reconciliation
between adjusted net income and net income which is determined in accordance
with GAAP.
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"Customer demand for our complete line of PC products contributed to our robust
performance this quarter," said K.Y. Ho, Chairman and Chief Executive Officer,
ATI Technologies Inc. "This, coupled with some improvement in the PC market -
particularly notebooks - enabled ATI to deliver solid top-line growth."
"As we look into the fourth quarter and into fiscal 2004, our product line-up
has never been stronger," continued Mr. Ho. "We've recently announced
significant design wins from manufacturers in Asia for our DTV technology, and
the customer demand for richer visual content on smart-phone solutions has
created another growth opportunity for ATI beyond the PC."
"This quarter, we maintained our performance lead in the high-end desktop market
and, in addition, took a significant lead in the performance mainstream and
mainstream markets," said David Orton, President and Chief Operating Officer,
ATI Technologies Inc. "By maintaining ATI's product leadership in our core PC
markets, executing on our product roadmap, and delivering new products in time
for the 'Spring Refresh', we were ready with the right products at the right
time to satisfy growing customer demand."
Outlook
ATI expects revenue in the fourth quarter in the range of $335 - $365 million.
Gross margin for the fourth quarter, as a percentage of revenues, is expected to
improve slightly. Operating expenses, excluding amortization of intangibles and
other charges, for the fourth quarter are expected to be somewhat higher than
the third quarter of this year. As a result of the above, adjusted net income
should improve in the fourth quarter of fiscal 2003 relative to the third
quarter.
OPERATIONAL HIGHLIGHTS
ATI extended its performance leadership in the enthusiast segment and took the
leadership in the performance and mainstream markets with the launch of the
RADEON(TM) 9800, RADEON(TM) 9600 and RADEON(TM) 9200. These products represent
the strongest product line-up the Company has ever seen.
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Other highlights include:
o ATI made high performance mobile gaming a reality with the introduction of
the MOBILITY(TM) RADEON(TM) 9600.
o Subsequent to quarter-end, ATI launched its new desktop and notebook
integrated graphics processors, the RADEON(TM) 9100 IGP and MOBILITY(TM)
RADEON(TM) 9100 IGP, bringing PC gaming capabilities to a new price point.
Top motherboard manufacturers, including Asus, Gigabyte and MSI plan to
develop products based on these new IGP offerings.
o ATI launched the MOBILITY(TM) RADEON(TM) 7000 IGP, a feature-rich
integrated graphics processor, which supports both the Intel(R) Pentium(R)
M and the Mobile Intel(R) Pentium(R) 4 Processor - M.
o ATI unveiled a refreshed ALL-IN-WONDER(R) product family, including the
ALL-IN-WONDER(R) 9800, ALL-IN-WONDER(R) 9000 and TV WONDER(TM) - targeting
the enthusiast and mainstream - to enhance the home theatre experience and
offer more choice.
o ATI announced key design wins with major OEMs for desktop, workstation,
notebook and integrated solutions, including fifteen notebooks using
Intel(R) Centrino(TM) mobile technology.
o RADEON(TM) 9800 was the graphics card of choice for OEMs and System
Integrators in their performance PCs. OEMs Dell Computer and Gateway, as
well as System Integrators, ABS, Alienware, Falcon Northwest and Voodoo all
chose the RADEON(TM) 9800 for their flagship products.
o ATI announced design wins for its DTV solutions with numerous television
and set-top box manufacturers, including end-to-end DTV solutions
(XILLEON(TM)/NxtWave) as selected by two leading consumer electronics
brands in China - Changhong, which markets under the Apex brand in the
United States, and Hisense.
o ATI announced a technology development agreement with Nintendo Co., Ltd, in
which ATI and Nintendo agreed to develop new technologies for use in
Nintendo products.
Management's Discussion and Analysis of Interim Financial Results
Revenues
ATI's revenues for the third quarter increased 7.4 per cent to $342.1 million
from $318.5 million in the second quarter primarily due to continued broad-based
demand for the Company's products in both the PC OEM and System Integrator or
"white-box" markets.
6 of 28
On a year-over-year basis, revenues in the third quarter and the first nine
months were up 28.5 and 25.6 per cent respectively. These increases reflect the
success of ATI's new products, particularly the RADEON(TM) 9800, RADEON(TM) 9700
and RADEON(TM) IGP family of products.
Gross Margin
Gross margin for the third quarter improved to 32.9 per cent of revenues
compared to 28.9 per cent in the second quarter. Increased gross margin right
across the PC product line was largely responsible for this increase, slightly
offset by a quarterly decline in royalty income. Excluding royalty income,
margin improved from 27.9 per cent to 32.4 per cent.
On a year-over-year basis, gross margin as a percentage of revenues for the
third quarter and the first nine months of the year declined from 35.0 per cent
and 33.7 per cent to 32.9 per cent and 29.8 per cent respectively. These
declines were largely a result of a general decline in discrete mobile product
gross margin during the fiscal 2003 periods.
Operating Expenses
Operating Expenses, Excluding Amortization of Intangibles and Other Charges
- ---------------------------------------------------------------------------
Operating expenses, excluding the amortization of intangibles and other charges,
were $89.4 million in the third quarter, up significantly from second quarter
levels of $80.3 million. Of this increase, $1.3 million is associated with the
stronger Canadian dollar, approximately $1.5 million is primarily from
accelerated depreciation on facilities the Company plans to vacate, and
approximately $3.9 million is associated with increased investment in R&D. The
increased selling and marketing expense is directly impacted by just over $1.0
million from variable expense associated with higher sales levels, as well as
$1.7 million in additional advertising to support new product introductions.
On a year-over-year basis, total operating expenses, excluding the amortization
of intangibles and other charges, for the third quarter and the first nine
months of the year increased 29.2 and 19.8 per cent to $89.4 million and $249.3
million respectively. Higher operating expense levels were primarily a result of
increasing investments in R&D, both in headcount and the cost of technology
required to support the increasingly more complex chips; as well as to a lesser
extent, volume-related selling expenses.
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Other Charges
- -------------
The Company incurred other charges during the quarter that have been excluded
from the Company's adjusted net income calculation. These other charges of $2.3
million arise out of matters relating to the Ontario Securities Commission
investigation. These charges are not considered to be part of the Company's
normalized operations. Please see Note 7 to the consolidated financial
statements.
Total Operating Expenses
- ------------------------
Total operating expenses reflect the operating expenses detailed earlier, as
well as the amortization of intangible assets (see Note 2 to the consolidated
financial statements) and other charges noted above.
Interest and Other Income
- -------------------------
Other income declined $2.0 million sequentially as a result of the write-off of
fixed assets, somewhat offset by the gain on foreign exchange due to the rise of
the Canadian dollar during the quarter.
Net Income
- ----------
Net income in the third quarter of fiscal 2003 was $12.4 million or $0.05 per
share compared to a net loss of $8.3 million or $0.04 per share for the second
quarter of fiscal 2003.
On a year-over-year basis, net income for the third quarter and the first nine
months of the year increased to $12.4 million and $9.1 million respectively.
These increases were a result of higher revenue levels and lower expenses for
goodwill and intangible assets in fiscal 2003 as a result of the adoption of the
accounting policies relating to the treatment of goodwill and intangible assets.
These increases were offset somewhat by greater investment in R&D and increased
selling and marketing expense as well as other charges incurred in the second
quarter and third quarter of fiscal 2003.
8 of 28
Adjusted net income(1) for the third quarter was $17.5 million or $0.07 per
share compared to $9.7 million or $0.04 per share for the previous quarter.
Increased revenue and improving gross margin, somewhat offset by increased
operating expenses, was largely responsible for the increase in adjusted net
income.
On a year-over-year basis, adjusted net income per share for the third quarter
and the first nine months of the year declined from $0.08 and $0.19 to $0.07 and
$0.14, respectively, largely as a result of increased operating expenses,
somewhat offset by higher revenue levels.
Liquidity and Financial Resources
ATI's cash flow from operations was $42.6 million in the third quarter of fiscal
2003, reflecting cash generation similar to the previous quarter.
Inventory levels increased slightly to $136.4 million at the end of the third
quarter compared to the second quarter of 2003, where inventory was $131.3
million, but decreased significantly from inventory levels at August 31, 2002 of
$175.3 million. Inventory levels are at an appropriate level to support sales.
Receivables were $205.0 million, up $40.7 million from the end of fiscal 2002
due to strong sales in the third quarter.
As of May 31, 2003, ATI had working capital of $385.7 million, compared to
$361.7 million at August 31, 2002. The Company's cash position, including
short-term investments, grew to a new high of $285.2 million as of quarter end,
compared to $240.9 million in the second quarter. ATI's cash position increased
during the quarter as a result of positive earnings and a pre-payment of $18.0
million recorded as deferred revenue, associated with a development contract.
The Company's cash position as at May 31, 2003 also increased compared to its
levels at August 31, 2002.
(1) Adjusted net income excludes the after-tax effect of gain on investments,
after-tax effect of other charges described in Note 7 to the consolidated
financial statements, amortization of goodwill and intangible assets related to
the Company's acquisitions, and deferred tax recovery of future tax liability
pertaining to intangible assets acquired, related to the Company's acquisitions.
Each of these items has been excluded from adjusted net income as they are not
considered to be part of the Company's normalized operations. While the Company
recognizes that adjusted net income does not have any standardized meaning
described by generally accepted accounting principles, or GAAP, and that its
adjusted net income calculation cannot be used as a comparison to other
companies' financial performance, ATI believes that its adjusted net income more
appropriately reflects the Company's operating performance. Please see the table
titled "Adjusted Net Income - Reconciliation" at the end of this release for the
reconciliation between adjusted net income and net income which is determined in
accordance with GAAP.
9 of 28
Intangible assets other than goodwill declined to $10.1 million at the end of
the third quarter of fiscal 2003, from $21.9 million at August 31, 2002. The
decline in these assets was due to continued amortization. During the first
quarter the Company reclassified $2.3 million relating to workforce from
intangible assets to goodwill as a result of the adoption of CICA Handbook
Section 3062.
As discussed previously, beginning in the first quarter of fiscal 2003, the
Company adopted the new accounting policies relating to the treatment of
goodwill and intangible assets (CICA Handbook Section 3062) and therefore is no
longer amortizing these assets. Goodwill, which is associated primarily with the
prior acquisition of ArtX, is currently $190.1 million and will be tested for
impairment on an annual basis. The Company completed the transitional goodwill
impairment assessment during the second quarter of 2003 and has determined no
impairment existed as of September 1, 2002.
Corporate Governance
ATI has appointed Dr. James Fleck, emeritus Professor, Rotman School of
Business, University of Toronto and ex-chairman, Alias Research Inc., as "lead
director" of the Company. The Company has also established a Corporate
Governance and Nominations Committee whose responsibilities include monitoring
and refining ATI's corporate governance policies and procedures on an ongoing
basis. This includes the review and refinement of the Company's corporate
governance policies and procedures to ensure that the Board of Directors of ATI
can fulfill its statutory mandate to supervise the management of the business
and affairs of the Company. In addition to the appointment of Dr. Ronald Chwang
in January 2003, a search is underway for two qualified and independent members
of the Board to expand the size of the Board of Directors to eight.
Assisted by various advisors with expertise in the area of corporate governance,
ATI has enhanced its policies and procedures in the context of the significant
regulatory initiatives in North America that have been adopted to enhance
governance practices of public companies generally. Those initiatives include
the proposed amendments to the guidelines of the Toronto Stock Exchange, the
governance rules proposed by NASDAQ and the various requirements that are coming
into force under the Sarbanes-Oxley Act of 2002.
10 of 28
Claims and Proceedings
On May 16th Cirrus Logic, Inc. filed in the United States District Court,
Western District of Texas, a Patent infringement lawsuit against ATI
Technologies Inc. The suit claims infringement of US Patent No. 5,841,418 issued
on November 24, 1998 entitled "Dual displays having independent resolutions and
refresh rates".
The lawsuit seeks injunctive relief and damages in an unspecified amount. ATI
intends to vigorously defend the lawsuit. While Management currently believes
that the amount of ultimate liability, if any, with respect to this action will
not materially affect the financial position, results of operation, or liquidity
of the Company, the ultimate outcome of any litigation is uncertain. Should the
action be successful, there could be a material adverse effect on the Company.
In February, the Company announced that it had reached an agreement for the full
and complete settlement of all remaining claims alleged in the shareholder class
action lawsuits filed in May 2001 in the United States District Court for the
Eastern District of Pennsylvania. The terms of the Stipulation and Agreement of
Settlement, which were subject to final court approval and notice to class
members, included no admission of liability or wrongdoing by the Company or
other defendants. The Court held a fairness hearing on April 25, 2003. There
were no objections raised and the Court approved the settlement. ATI had paid
$8.0 million into court pending final approval, which funds will now be
disbursed in accordance with the Court approved settlement. A portion of this
amount is expected to be paid by ATI's insurer, but has not yet been recognized.
11 of 28
Adjusted Net Income - Reconciliation
The table below presents adjusted net income and adjusted net income per share,
which excludes the after-tax effect of gain on investments, after-tax effect of
other charges, amortization of goodwill(1) and intangible assets related to the
Company's acquisitions, and deferred tax recovery of future tax liability
pertaining to intangible assets acquired, related to the Company's acquisitions.
(Thousands of US dollars, except per share amounts)
--------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31
2003 2002 2003 2002
--------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Net income (loss) - GAAP basis $ 12,435 $ (1,951) $ 9,086 $(15,309)
Amortization of intangible assets(1) 3,169 21,679 9,496 64,033
Other charges 2,288 - 18,284 -
Gain on investments - - (32) -
Tax recovery of other charges (172) - (1,164) -
Net tax on sale of investments - - 6 -
Deferred tax recovery of future tax liability (181) (490) (1,499) (1,457)
on intangible assets
--------------------------------------------------------------------------------------------------------------
Adjusted net income $ 17,539 $ 19,238 $ 34,177 $ 47,267
==============================================================================================================
Adjusted net income per share
Basic $ 0.07 $ 0.08 $ 0.14 $ 0.20
Diluted $ 0.07 $ 0.08 $ 0.14 $ 0.19
==============================================================================================================
Weighted average number of shares (000's):
Basic 238,183 236,082 237,453 234,244
Diluted 242,539 248,382 242,629 247,539
==============================================================================================================
(1) Effective September 1, 2002, the Company no longer amortizes goodwill. See
Note 1 to the consolidated financial statements.
Forward-looking Statements and Uncertainties
Certain statements in this release constitute "forward-looking statements." When
used in this release, words such as "plans," "intends," "anticipates," "should,"
"estimates," "expects," "believes," "indicates," "targeting," "suggests," and
similar expressions are intended to identify forward-looking statements.
Forward-looking statements are based on current expectations and entail various
risks and uncertainties that are outlined in this release and in the Company's
2002 Annual Report and 2002 Annual Information Form. As a result of these risks
and uncertainties, the Company's operating results and common share price may be
subject to significant volatility, particularly on a quarterly basis. For
example, the markets for the Company's products are characterized by changing
market conditions, frequent new product introductions, seasonal and variable
demand and rapid technology changes. Other factors that could cause the
Company's results to vary include, but are not limited to, lack of anticipated
growth in the demand for PCs, gaming consoles and consumer electronic devices in
which the Company's products are incorporated, reductions in the Company's
average selling prices for its products due to competitive pressures and other
factors, the introduction of new products by the Company's competitors which
render the Company's products non-competitive, delays encountered by the Company
in developing new products or enhancements, including integrated graphics and
core logic components, in the time frame required by its customers, delays in
manufacturing or unfavourable manufacturing yields experienced by the Company's
independent foundries, unexpected variances in material costs, including silicon
wafer, memory and printed circuit boards, and constraints on the supply of
components utilized in the Company's products and in the PC industry generally.
These risks and uncertainties could cause or contribute to actual results that
are materially different from those anticipated or experienced in the past.
Additional information concerning factors that could cause the Company's
financial results to fluctuate is contained in the Company's filings with
Canadian and U.S. securities regulatory authorities. ATI disclaims any
obligation or intention to update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
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Conference Call Information
ATI Technologies Inc. will host a conference call to discuss its financial
results for the third quarter results today, Wednesday June 25, 2003 at 8:30 AM
(EDT) (5:30 AM Pacific, 6:30 AM Mountain, 7:30 AM Central).
To participate in the conference call, please dial 416-405-9328 ten minutes
before the scheduled start of the call. No password is required. A live web cast
of the conference call will be available at www.ati.com under the Financial
Information section, 2003 Conference Calls - Q3 2003 at
http://mirror.ati.com/companyinfo/ir/quarterlyresults.html. Replays of the
conference call will be available through July 2, 2003. Replay information is as
follows: Replay: 416-695-5800, Passcode: 1412526. A web cast replay will be
available at the web site noted above.
About ATI Technologies
ATI Technologies Inc. is a world leader in the design and manufacture of
innovative 3D graphics and digital media silicon solutions. An industry pioneer
since 1985, ATI is the world's foremost visual processor unit (VPU) provider and
is dedicated to deliver leading-edge performance solutions for the full range of
PC and Mac desktop and notebook platforms, workstation, set-top and digital
television, game console and handheld markets. With 2002 revenues in excess of
$1 billion, ATI has more than 1,900 employees in the Americas, Europe and Asia.
ATI common shares trade on NASDAQ (ATYT) and the Toronto Stock Exchange (ATY).
Copyright 2003 ATI Technologies Inc. All rights reserved. ATI and ATI product
and product feature names are trademarks and/or 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.
For media relations, please contact:
Chris Evenden, Director, Public Relations, ATI Technologies Inc.,
at (905) 882-2600, Ext. 8107 or cevenden@ati.com
----------------
For investor relations' support, please contact:
Janet Craig, Director, Investor Relations, ATI Technologies Inc.,
at (905) 882-2600, Ext. 2631 or janet@ati.com
-------------
- 30 -
Financial Statements Attached
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ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
(Thousands of US dollars, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31 May 31 May 31
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues $ 342,131 100.0% $ 266,225 100.0% $ 982,633 100.0% $ 782,242 100.0%
Cost of goods sold 229,481 67.1% 172,996 65.0% 690,037 70.2% 518,921 66.3%
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Margin 112,650 32.9% 93,229 35.0% 292,596 29.8% 263,321 33.7%
Expenses
Selling and marketing 25,383 7.4% 19,427 7.3% 68,778 7.0% 59,444 7.6%
Research and development 53,713 15.7% 39,935 15.0% 151,691 15.4% 121,759 15.6%
Administrative 10,326 3.0% 9,852 3.7% 28,856 2.9% 26,990 3.4%
Amortization of intangible assets 3,169 0.9% 21,679 8.1% 9,496 1.0% 64,033 8.2%
Other charges (Note 7) 2,288 0.7% - - 18,284 1.9% - -
- -----------------------------------------------------------------------------------------------------------------------------------
94,879 27.7% 90,893 34.1% 277,105 28.2% 272,226 34.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 17,771 5.2% 2,336 0.9% 15,491 1.6% (8,905) (1.1%)
Interest and other income (1,350) (0.4%) (306) (0.1%) (208) - 2,766 0.3%
Gain on investments - - - - 32 - - -
Interest expense (488) (0.2%) (248) (0.1%) (1,383) (0.2%) (251) -
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 15,933 4.6% 1,782 0.7% 13,932 1.4% (6,390) (0.8%)
Income taxes 3,498 1.0% 3,733 1.4% 4,846 0.5% 8,919 1.2%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 12,435 3.6% $ (1,951) (0.7%) $ 9,086 0.9% $ (15,309) (2.0%)
Retained earnings, beginning of period 69,297 106,753 72,646 120,111
- -----------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of period $ 81,732 $ 104,802 $ 81,732 $ 104,802
===================================================================================================================================
Net income (loss) per share (Note 8)
Basic and diluted $ 0.05 $ (0.01) $ 0.04 $ (0.07)
===================================================================================================================================
Weighted average number of shares
(000's)
Basic 238,183 236,082 237,453 234,244
Diluted 242,539 236,082 242,629 234,244
Outstanding number of shares at the end
of the quarter (000's) 239,267 236,620 239,267 236,620
===================================================================================================================================
See acompanying notes to consolidated financial statements. These financial
statements should be read in conjunction with the Company's most recent annual
consolidated financial statements, as at and for year ended August 31, 2002.
14 of 28
ATI TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Thousands of US dollars)
- -------------------------------------------------------------------------------
May 31 August 31
2003 2002
- -------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 235,458 $ 187,126
Short-term investments 49,784 49,801
Accounts receivable 204,980 164,259
Inventories 136,430 175,348
Prepayments and sundry receivables 25,624 21,131
Future income tax assets 3,949 3,630
- -------------------------------------------------------------------------------
Total current assets 656,225 601,295
Capital assets 88,228 95,838
Intangible assets (Note 2) 10,082 21,858
Goodwill (Note 2) 190,095 187,815
Long-term investments 7,405 7,405
Tax credits recoverable 21,051 -
Future income tax assets 1,557 844
- -------------------------------------------------------------------------------
Total Assets $ 974,643 $ 915,055
===============================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ - $ 12,015
Accounts payable 158,183 172,093
Accrued liabilities 90,198 51,087
Deferred revenue 18,602 250
Income taxes payable - 170
Current portion of long-term debt (Note 4) 1,388 568
Future income tax liabilities 2,112 3,459
- -------------------------------------------------------------------------------
Total current liabilities 270,483 239,642
Long-term debt (Note 4) 28,773 15,798
Future income tax liabilities 12,445 12,588
- -------------------------------------------------------------------------------
Total liabilities 311,701 268,028
Shareholders' equity:
Share capital 568,081 561,477
Contributed surplus 4,855 4,630
Retained earnings 81,732 72,646
Currency translation adjustment 8,274 8,274
- -------------------------------------------------------------------------------
Total shareholders' equity 662,942 647,027
- -------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 974,643 $ 915,055
===============================================================================
See accompanying notes to consolidated financial statements. These financial
statements should be read in conjunction with the Company's most recent annual
consolidated financial statements, as at and for year ended August 31, 2002.
15 of 28
ATI TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands of US dollars)
- ----------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income (loss) $ 12,435 $ (1,951) $ 9,086 $ (15,309)
Add items not affecting working capital:
Tax credits recoverable (8,905) - (21,051) -
Future income taxes (938) (2,070) (2,522) (3,860)
Depreciation and amortization 9,980 27,400 28,429 80,385
Other charges (Note 7) - - 1,400 -
Gain on investments - - (32) -
Foreign exchange loss 2,259 623 3,730 784
Net changes in non-cash working capital balances
relating to operations:
Accounts receivable (4,591) 3,132 (40,721) (26,790)
Inventories (5,127) (10,588) 38,918 (28,757)
Prepayments and sundry receivables 666 578 (3,224) (2,113)
Income taxes payable - (698) (170) (1,492)
Accounts payable 985 1,704 (13,910) 44,926
Accrued liabilities 17,740 3,037 39,111 11,867
Deferred revenue 18,117 (79) 18,352 (16)
- ----------------------------------------------------------------------------------------------------------------------
42,621 21,088 57,396 59,625
- ----------------------------------------------------------------------------------------------------------------------
Financing activities:
Increase (decrease) in bank indebtedness - 644 (12,015) 3,509
Addition to long-term debt - - 10,709 -
Principal payment on long-term debt (305) (181) (729) (181)
Settlement of swap contract (Note 6) - - (1,365) -
Issuance of common shares 5,813 4,504 6,604 12,254
Repayment of share purchase loans - 362 225 362
- ----------------------------------------------------------------------------------------------------------------------
5,508 5,329 3,429 15,944
- ----------------------------------------------------------------------------------------------------------------------
Investing activities:
Purchase of short-term investments (49,784) (49,632) (49,784) (54,233)
Maturity of short-term investments - 20,000 49,649 49,584
Additions to capital assets (3,837) (9,930) (12,723) (24,270)
Proceeds from sale of investments - - 280 -
Acquisitions, net of cash acquired - - - (2,068)
- ----------------------------------------------------------------------------------------------------------------------
(53,621) (39,562) (12,578) (30,987)
- ----------------------------------------------------------------------------------------------------------------------
Foreign exchange (gain) loss on cash held in foreign 92 132 85 (29)
currency
======================================================================================================================
Increase (decrease) in cash and cash equivalents (5,400) (13,013) 48,332 44,553
Cash and cash equivalents - beginning of period 240,858 229,021 187,126 171,455
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of period 235,458 216,008 235,458 216,008
Short-term investments 49,784 49,649 49,784 49,649
- ----------------------------------------------------------------------------------------------------------------------
Cash position - end of period $ 285,242 $ 265,657 $ 285,242 $ 265,657
======================================================================================================================
Cash position is defined as cash and cash equivalents and short-term
investments. See accompanying notes to consolidated financial statements. These
financial statements should be read in conjunction with the Company's most
recent annual consolidated financial statements, as at and for year ended August
31, 2002.
16 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
The principal business activities of ATI Technologies Inc. (the "Company") are
the design, manufacture and sale of 3D graphics and digital media silicon
solutions. The Company markets its products to original equipment manufacturers,
system builders, distributors and retailers primarily in North America, Europe
and Asia-Pacific.
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements are prepared in accordance with
Canadian generally accepted accounting principles for interim financial
statements. These financial statements and notes related thereto should be read
in conjunction with the Company's most recent annual consolidated financial
statements, as at and for the year ended August 31, 2002.
These consolidated financial statements follow the same accounting policies and
methods of their application as the most recent annual consolidated financial
statements with the exception of the following:
(a) CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based
Payments:
Effective September 1, 2002, the Company adopted Stock-based Compensation
and Other Stock-based Payments in CICA Handbook Section 3870, which
establishes standards for the recognition, measurement and disclosure of
stock-based compensation and other stock-based payments made in exchange
for goods and services provided by employees and non-employees. The
standard requires that a fair value based method of accounting be applied
to all stock-based payments to non-employees and to employee awards that
are direct awards of stock, that call for settlement in cash or other
assets or are stock appreciation rights that call for settlement by the
issuance of equity instruments. However, the new standard permits the
Company to continue its existing policy of recording no compensation cost
on the grant of stock options to employees with the addition of pro forma
information. The Company has applied the pro forma disclosure provisions of
the new standard to awards granted on or after September 1, 2002. No
restatement of prior periods was required as a result of the adoption of
the new standard. Consideration paid by employees on the exercise of stock
options is recorded as share capital. See Note 11 for the pro forma
disclosure as required by this standard.
(b) CICA Handbook Section 1581, Business Combinations, and Section 3062,
Goodwill and Other Intangible Assets:
In September 2001, the CICA issued Handbook Sections 1581 "Business
Combinations" and 3062 "Goodwill and Other Intangible Assets". The new
standards mandate the purchase method of accounting for business
combinations and require that goodwill no longer be amortized but instead
be tested for impairment at least annually. The standards also specify
criteria that intangible assets must meet to be recognized and reported
apart from goodwill. The standards require that the value of the shares
issued in a business combination be measured using the average share price
for a reasonable period before and after the date the terms of the
acquisition are agreed to and announced. Previously, the consummation date
was used to value the shares issued in a business combination.
The Company has fully adopted these new standards as of September 1, 2002,
and has discontinued amortization of all existing goodwill. The Company has
also reviewed existing intangible assets, including estimates of remaining
lives, and has reclassified $2.3 million from workforce to goodwill as of
September 1, 2002 to conform with the new criteria.
17 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) CICA Handbook Section 1581, Business Combinations, and Section 3062,
Goodwill and Other Intangible Assets (continued):
In connection with Section 3062's transitional goodwill impairment
evaluation, the Company is required to assess whether goodwill is impaired
as of September 1, 2002. The Company has completed the transitional
goodwill impairment assessment during the second quarter of 2003 and has
determined that no impairment existed as of September 1, 2002.
Effective September 1, 2002, the Company had unamortized goodwill of $190.1
million which is no longer being amortized. This change in accounting
policy is not applied retroactively and the amounts presented for prior
periods have not been restated for this change. The impact of this change
is as follows:
----------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31
----------------------------------------------------------------------------------------------------------------
(Thousands of US dollars, except per share amounts) 2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 12,435 $ (1,951) $ 9,086 $ (15,309)
Add back: goodwill amortization - 19,486 - 57,627
----------------------------------------------------------------------------------------------------------------
Net income before goodwill amortization $ 12,435 $ 17,535 $ 9,086 $ 42,318
----------------------------------------------------------------------------------------------------------------
Basic net income (loss) per share:
Net income (loss) $ 0.05 $ (0.01) $ 0.04 $ (0.07)
Net income before goodwill amortization 0.05 0.07 0.04 $ 0.18
----------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per share:
Net income (loss) $ 0.05 $ (0.01) $ 0.04 $ (0.07)
Net income before goodwill amortization 0.05 0.07 0.04 0.17
================================================================================================================
18 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
2. GOODWILL AND INTANGIBLE ASSETS
The net book values of goodwill and intangible assets acquired related to
NxtWave Communications, FGL Graphics, ArtX and Chromatic Research Inc. at May
31, 2003 and August 31, 2002 are as follows:
-----------------------------------------------------------------------------------------------------------
Cost Accumulated Net book
amortization value Net book value
(Thousands of US dollars) May 31, 2003 August 31, 2002
-----------------------------------------------------------------------------------------------------------
Purchased in-process R & D $ 105,550 $ 105,108 $ 442 $ 4,417
Workforce - - - 2,280
Core technology 32,544 22,904 9,640 15,161
-----------------------------------------------------------------------------------------------------------
Total intangible assets $ 138,094 $ 128,012 $ 10,082 $ 21,858
===========================================================================================================
Goodwill $ 392,357 $ 202,262 $ 190,095 $ 187,815
===========================================================================================================
Amortization expense related to intangible assets amounted to $3.2 million and
$9.5 million for the three months and nine months ended May 31, 2003
respectively (2002 - $2.1 million and $6.4 million). Amortization expense
related to goodwill was nil for the three months and nine months ended May 31,
2003 (2002 - $19.5 million and $57.6 million).
3. CREDIT FACILITY
The Company believes that although its current cash resources are sufficient to
meet ongoing operating requirements, the Company has, as a matter of prudence,
commenced the negotiation of a committed syndicated bank credit facility. In the
interim, the Company maintains demand bank credit facilities aggregating $26
million with a single financial institution. There were no borrowings
outstanding under these facilities.
4. LONG-TERM DEBT
---------------------------------------------------------------------------
Interest May 31 August 31
(Thousands of US dollars) rate 2003 2002
---------------------------------------------------------------------------
Obligation under capital lease (i) 6.31% $ 18,165 $ 16,366
Mortgage payable (ii) 6.96% 11,996 -
---------------------------------------------------------------------------
$ 30,161 16,366
Current portion of long-term debt 1,388 568
---------------------------------------------------------------------------
Total $ 28,773 $ 15,798
===========================================================================
19 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
4. LONG-TERM DEBT (CONTINUED)
(i) Obligation under capital lease :
The Company's obligation under capital lease represents the lease on the
building facility in Markham, Ontario.
(ii) Mortgage payable :
On September 10, 2002, the joint venture, Commerce Valley Realty
Holding Inc. ("CVRH"), in which the Company has a 50 per cent
ownership interest entered into a mortgage agreement with a lender to
finance the building facility in Markham, Ontario. The Company's
proportionate share of the mortgage amounted to $10.8 million (Cdn.
$16.9 million), and the mortgage has a repayment term of 12 years
bearing interest at a rate of 6.96 per cent per annum. The underlying
mortgage is denominated in Canadian dollars. Funding under the
mortgage was received in October 2002.
5. GUARANTEE
The Company and other owners of CVRH have jointly and severally provided a
guarantee for the mortgage payment of the building facility in Markham, Ontario.
In the event that CVRH is unable to meet the underlying mortgage payment to the
lender, the Company and other owners of CVRH will be jointly and severally
responsible for it under this guarantee. The monthly mortgage interest and
principal payment amounts to approximately $0.2 million. The mortgage has a
repayment term of 12 years with a maturity date on November 1, 2014. As of May
31, 2003, the outstanding amount of the mortgage stood at $24.0 million (Cdn.
$32.8 million).
In addition, the Company posted a letter of credit in the amount $2.2 million
(Cdn. $3.0 million) in favour of CVRH and CVRH, in turn, assigned this letter of
credit for the exclusive benefit of the lender as additional security of the
mortgage. The letter of credit has a term of 5 years and will expire 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.
6. LOSS ON INTEREST RATE SWAP
In fiscal 2001, CVRH entered into an interest rate swap contract to hedge its
exposure to the interest rate risk applicable to its mortgage for the building
facility in Markham, Ontario. This interest rate swap contract closed on
September 10, 2002 resulting in a proportionate loss of $1.4 million to the
Company. The loss is treated as a deferred expense item in the balance sheet and
is charged to the consolidated statements of operations and retained earnings as
a yield adjustment to the interest expense, over the term of the mortgage.
20 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
7. OTHER CHARGES
Other charges comprise the following items:
(Thousands of US dollars)
-----------------------------------------------------------------------------
Three months Nine months
ended ended
May 31, 2003 May 31, 2003
-----------------------------------------------------------------------------
Settlement of class action lawsuits (i) $ - $ 8,000
OSC Matters (ii) 2,288 5,100
Restructuring charge - Europe (iii) - 2,765
Lease exit charge (iv) - 2,419
-------------------------------------------------------------------------
Total $ 2,288 $ 18,284
==========================================================================
(i) Settlement of class action lawsuits
On February 7, 2003, the Company announced that it has reached an agreement
for the full and complete settlement of all remaining claims alleged in the
shareholder class action lawsuits filed in May 2001 in the United States
District Court for the Eastern District of Pennsylvania. This litigation
relates to alleged misrepresentations and omissions made by the Company and
certain directors and officers during a period preceding its May 2000
earnings warning. The terms of the Stipulation and Agreement of Settlement,
which were subject to final court approval and notice to class member,
included no admission of liability or wrongdoing by the Company or other
defendants. The Court held a fairness hearing on April 25, 2003. There were
no objections raised and the Court approved the settlement. ATI had paid $8
million into court pending final approval, which funds will now be
disbursed in accordance with the Court approved settlement. A portion of
this amount is expected to be paid by ATI's insurer, but has not yet been
recognized.
(ii) OSC Matters
In January, the Company announced that Staff of the Ontario Securities
Commission (OSC) had filed a Notice of Hearing and Statement of Allegations
in relation to ATI and others. The Notice alleged that ATI failed to
disclose information concerning the shortfall 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 ATI made
a misleading statement to Staff of the Commission in August 2000 regarding
the events leading up to the disclosure on May 24, 2000 of the shortfall.
Seven individuals are also named in the Notice. The Notice alleged that six
of these individuals, including K.Y. Ho, the Chief Executive Officer of
ATI, engaged in insider trading contrary to the Securities Act. A date for
the hearing has not been fixed. The Board of Directors set up a special
committee and retained advisors to conduct an independent review of the
concerns raised by OSC staff.
So far, the Company has incurred external charges in connection with this
matter totaling $2.3 million and $5.1 million for the three months and nine
months ended May 31, 2003 respectively.
21 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
7. OTHER CHARGES (CONTINUED)
(iii) Restructuring charge - Europe
During the second quarter, the Company announced the closure of ATI
Technologies (Europe) Ltd. ("ATEL"), its subsidiary in Dublin, Ireland.
The Company has successfully shifted its European business model from
direct selling to marketing its graphic chip technology to original design
manufacturers (ODM) and add-in-board (AIB) partners to serve European
original equipment manufacturers (OEM), the system builders and
distribution channels. The transition has resulted in the redundancy of
the operations in Dublin.
The Company recorded a pre-tax charge of $2.8 million related to the
closure of ATEL for the second quarter. The following table details the
components of the charge:
(Thousands of US dollars)
-------------------------------------------------------------------------
Amount
-------------------------------------------------------------------------
Exit and other costs $ 1,365
Asset impairment (non-cash) 1,400
-------------------------------------------------------------------------
Total $ 2,765
=========================================================================
The following table details the activity through the accrued
restructuring liability for the quarter ended May 31, 2003:
(Thousands of US dollars)
-----------------------------------------------------------------------
Amount
-----------------------------------------------------------------------
Balance at March 1, 2003 $ 1,365
Provision -
Cash payments (238)
-----------------------------------------------------------------------
Balance at May 31, 2003 $ 1,127
=======================================================================
The asset impairment is due to the write-down of the building facility in
Dublin, Ireland to fair value less cost to sell. The building facility,
which has a fair value of $1.9 million, is included in the capital assets
for financial statement presentation purposes.
The Company expects to complete the major components of its exit plan for
ATEL by July 2003 and to pay out the cash portion of the restructuring
charge by the end of the fiscal year.
22 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
7. OTHER CHARGES (CONTINUED)
(iv) Lease exit charge
During the second quarter, the Company determined that it would exit
certain leased properties located in Markham, Ontario. As a result, the
Company recognized the fair value of the future net costs related to the
leases as a charge for the second quarter.
8. NET INCOME (LOSS) PER SHARE
The following table presents a reconciliation of the numerators and denominators
used in the calculations of the basic and diluted net income (loss) per share:
---------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31
(Thousands of US dollars, except per share amounts) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------
Net income (loss) $ 12,435 $ (1,951) $ 9,086 $ (15,309)
---------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding:
Basic 238,183 236,082 237,453 234,244
Effect of stock options 4,356 - 5,176 -
---------------------------------------------------------------------------------------------------------------
Diluted 242,539 236,082 242,629 234,244
===============================================================================================================
Net income (loss) per share:
Basic and diluted $ 0.05 $ (0.01) $ 0.04 $ (0.07)
===============================================================================================================
23 and 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
9. SUPPLEMENTAL CASH FLOW INFORMATION
---------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31
(Thousands of US dollars) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------
Cash paid for:
Interest $ 456 $ 85 $ 1,254 $ 89
Income taxes 888 206 1,831 795
Interest received 628 1,499 2,292 4,165
Non-cash investing and financing activities:
Acquisition of building through capital lease - 16,262 - 16,262
===============================================================================================================
24 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
10. SEGMENTED INFORMATION
The Company operates in one operating segment, that being the design,
manufacture and sale of 3D graphics and digital media silicon solutions.
The following tables provide revenues by geographic area and by product, as well
as capital assets, intangible assets and goodwill by geographic area. The
breakdown in revenues by geographic area in the following table represent the
geographic region where the revenue is booked:
---------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
May 31 May 31
(Thousands of US dollars) 2003 2002 2003 2002
---------------------------------------------------------------------------------------------------------------
Revenues:
Canada $ 4,014 $ 2,857 $ 14,989 $ 12,742
United States 62,550 74,756 198,449 229,662
Europe 23,134 39,020 90,991 125,130
Asia-Pacific 252,433 149,592 678,204 414,708
---------------------------------------------------------------------------------------------------------------
Consolidated revenues $ 342,131 $ 266,225 $ 982,633 $ 782,242
===============================================================================================================
Product revenues:
Components $ 233,799 $ 147,913 $ 648,303 $ 401,660
Boards 105,537 112,053 312,869 361,010
Others 2,795 6,259 21,461 19,572
------------------------------------------------------ ------------- ------------- ------------- --------------
Consolidated revenues $ 342,131 $ 266,225 $ 982,633 $ 782,242
===============================================================================================================
Capital assets, intangible assets and goodwill:
Canada $ 75,002 $ 78,363
United States 210,675 235,198
Europe 2,282 4,768
Asia-Pacific 446 1,242
------------------------------------------------------ ------------- ------------- ------------- --------------
Consolidated capital assets, intangible assets and
goodwill $ 288,405 $ 319,571
===============================================================================================================
25 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
11. STOCK-BASED COMPENSATION
For stock options granted to employees, had the Company determined compensation
costs based on the "fair value" of the stock options at grant dates consistent
with the method prescribed under CICA Handbook Section 3870, the Company's net
income per share would have been reported as the pro forma amounts indicated
below:
-------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
(Thousands of US dollars, except per share amount) May 31, 2003 May 31, 2003
-------------------------------------------------------------------------------------------------------
Net income for the period, as reported $ 12,435 $ 9,086
Pro forma adjustment for stock-based compensation (197) (320)
------------------------------------------------------------------------------------------------------
Pro forma net income $ 12,238 $ 8,766
======================================================================================================
Pro forma net income per share - basic and diluted $ 0.05 $ 0.04
======================================================================================================
The weighted average estimated fair values at the date of grant for the options
granted for the three months and nine months ended May 31, 2003 was nil and
$2.65 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 assumptions:
----------------------------------------------------------------------------------------
Nine months ended
May 31, 2003
----------------------------------------------------------------------------------------
Risk-free interest rate 3.1%
Dividend yield 0%
Volatility factor of the expected market price of the Company's
common shares 71.1%
Weighted average expected life of the options 4.15 years
=========================================================================================
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period on a straight-line
basis.
26 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
12. 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
2003 2002 2003 2002
(Thousands of US dollars, except per share amounts)
---------------------------------------------------------------------------------------------------------------
Net income (loss) in accordance with Canadian GAAP $ 12,435 $ (1,951) $ 9,086 $ (15,309)
Tax effect of stock options exercised (306) (812) (379) (1,808)
Loss on hedging transactions - (1,365) - (1,365)
Amortization of purchased in-process research and 1,325 - 3,975 -
development
Amortization difference between Canadian and U.S. GAAP 29 621 (143) 1,806
Stock compensation expenses (3,729) 1,085 (3,607) (3,741)
Restructuring charges not yet incurred (45) - 270 -
===============================================================================================================
Net income (loss) in accordance with U.S. GAAP $ 9,709 $ (2,422) $ 9,202 $ (20,417)
===============================================================================================================
Net income (loss) per share:
Basic and diluted $ 0.04 $ (0.01) $ 0.04 $ (0.09)
===============================================================================================================
Weighted average number of shares (000's):
Basic 238,183 236,082 237,453 234,244
Diluted 242,539 236,082 242,629 234,244
===============================================================================================================
27 of 28
ATI TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2003
(Unaudited)
13. LITIGATION
The Company is subject to a legal proceeding filed in the United States District
Court, Western District of Texas, by Cirrus Logic, Inc. on May 16, 2003
regarding a patent infringement lawsuit against the Company. The suit claims
infringement of US Patent No. 5,841,418 issued on November 24, 1998 entitled
"Dual displays having independent resolutions and refresh rates".
The lawsuit seeks injunctive relief and damages in an unspecified amount. The
Company intends to vigorously defend the lawsuit. While Management currently
believes that the amount of ultimate liability, if any, with respect to this
action will not materially affect the financial position, results of operation,
or liquidity of the Company, the ultimate outcome of any litigation is
uncertain. Should the action be successful, there could be a material adverse
effect on the Company.
28 of 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ATI TECHNOLOGIES INC.
Date: June 25, 2003 By: //Terry Nickerson//
--------------------------------------------
Name: Terry Nickerson
Title: Senior Vice President, Finance and
Chief Financial Officer