ATI Reports Fourth Quarter and Fiscal 2005 Results

MARKHAM, Ontario—(BUSINESS WIRE)—Oct. 6, 2005— ATI Technologies Inc. (NASDAQ: ATYT)(TSX:ATY) today announced financial results for the fourth quarter and fiscal year ended August 31, 2005. These results are in line with the preliminary results announced on August 29, 2005.

Revenues(1) for the fourth quarter were $470 million, a $60 million decline relative to the third quarter of fiscal 2005. Gross margin percentage was 9.0% including a $67 million inventory write-down taken in the quarter. Excluding this write-down, gross margin was 23.3%. Net loss for the quarter was $104 million ($0.41 per diluted share). Stock-based compensation costs(2) in the quarter totaled $11.2 million. Excluding the inventory write-down of $67 million and stock-based compensation costs and related taxes, the net loss for the quarter was $29 million or $0.12 per share.

Revenues for fiscal 2005 rose 11% to $2.22 billion. Gross margin was 27.6%. Net income for the year was $17 million ($0.07 per diluted share) versus $205 million ($0.80 per diluted share) in 2004. Stock-based compensation costs in fiscal 2005 totaled $42.5 million as compared with $7.6 million last year. Excluding the inventory write-down and stock-based compensation costs and related taxes, net income for the year was $119 million or $0.46 per share.

"We are entering fiscal 2006 with new products and an intense focus on operational and financial performance," said David Orton, ATI's Chief Executive Officer. "We've delivered top-to-bottom technology and performance leadership with the 90 nm Radeon(R) X1000 series. We are aggressively implementing concrete programs in the areas of delivery performance, product cost improvements and operational efficiencies. Our new products and operational programs position us well for the future."

Recent Highlights

- Announced the Radeon X1000 family, built using the cutting-edge 90 nanometer semiconductor fabrication technology, delivering superior performance and image quality.

- Began volume shipments of Radeon(R) Xpress 200 Crossfire Edition chipsets supporting multi-GPU capability. Featured in a review by the enthusiast website,, the Radeon Xpress 200 CrossFire Edition was deemed, "the best overclocker on the market," and "one of the most enthusiast-friendly chipsets ever produced by any manufacturer."

- Introduced Avivo(TM), a suite of hardware and software technologies that takes video capture and display quality to new levels. Consumers watching videos or editing photographs on their PCs will benefit from Avivo enabling 64 times as many colors as other computers.

- Introduced highly integrated new versions of the Theater and Xilleon chipsets for the digital television market. These new processors reinforce ATI's position as an industry leader and provide DTV manufacturers with a cost-effective option to comply with approaching FCC mandate deadlines.

- Achieved recent high-profile Imageon design wins including the new fully featured S75 and SL75 multimedia phones from Siemens, as well as the Motorola ROKR E1 "iTunes" phone.


First quarter of fiscal 2006 revenues are expected to increase by approximately 15% relative to the fourth quarter of fiscal 2005 due to growth in desktop discrete, chipset and handheld businesses. Gross margin percentage is expected to recover significantly to about 29% based on the introduction of a new desktop product family, continued improvements in chipset margins and the contribution of royalty income from our game console business. Operating expenses, excluding stock-based compensation costs, are expected to increase 2 - 3% relative to the fourth quarter of fiscal 2005.


This is management's discussion and analysis of financial condition and the results of operations (MD&A) that comments on ATI's operations, financial condition and cash flows for the three months ended August 31, 2005 compared to the three months ended August 31, 2004. This MD&A should be read in conjunction with the attached unaudited interim consolidated financial statements for the period ended August 31, 2005, the annual MD&A contained in the 2004 Annual Report and the audited consolidated financial statements for the year ended August 31, 2004.

In this MD&A, ATI, we, us and our mean ATI Technologies Inc. and its subsidiaries.

Important Information Regarding Forward-looking Statements

Forward-looking statements look into the future and provide an opinion as to the effect of certain events and trends on the business. Forward-looking statements may include words such as "plans," "intends," "anticipates," "should," "estimates," "expects," "believes," "indicates," "targeting," "suggests" and similar expressions.

This MD&A and other sections of this release (in particular, the section entitled "Outlook") contain forward-looking statements about ATI's objectives, strategies, financial condition and results. These forward-looking statements are based on current expectations and various factors and assumptions and entail various risks and uncertainties.

It is important to note that:

- unless otherwise indicated, forward-looking statements describe our expectations as of October 6, 2005;

- our actual results may differ materially from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate;

- we cannot provide any assurance that forward-looking statements will materialize; and

- we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason.

Material factors that could cause our actual results to differ materially from the forward-looking statements in this release include, but are not limited to: unexpected variations in market growth and demand for new GPU products and technologies, potential constraints on our ability to develop, launch and ramp new products on a timely basis, manufacturing considerations, competition, industry cyclicality and seasonality, dependence on third-parties for manufacturing, critical industry transitions and other risks detailed in our regulatory filings.

Additional information concerning risks and uncertainties affecting our business and other factors that could cause our financial results to fluctuate is contained in our filings with Canadian and U.S. securities regulatory authorities, including our 2004 Annual Information Form and 2004 Annual Report filed on SEDAR at



Fourth quarter revenues declined $60 million or 11% to $470 million as compared to the previous quarter, due to lower sales in the PC segment. The PC segment accounted for approximately 80% of quarterly revenues while the Consumer segment accounted for approximately 20% of revenues.


PC revenue fell 18% from the third quarter of fiscal 2005 to $377 million. The primary factor behind the decline was lower sales of performance and enthusiast desktop products in the Add-in-Board (AIB) and retail channels. The combination of lower volumes and reductions in average selling price (ASP) to stimulate demand, led to the decline in revenues. The decline in revenues was partially offset by stronger sales of desktop integrated products. Overall PC units were flat sequentially.

Desktop integrated revenue increased nearly 90% from the third quarter of fiscal 2005. Continued market penetration and significant OEM design wins for the Radeon Xpress 200 series for the AMD and Intel platforms accounted for the increase.

While notebook discrete revenue was down sequentially, notebook integrated revenue increased approximately 60% reflecting the continued trend towards the use of integrated chipsets for notebook graphics as well as increased market share in this segment.

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