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News & Events > 2004 News Releases > August 19 |
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2004 News Releases "FOR IMMEDIATE RELEASE" MOSAID Announces First Quarter Results for Fiscal Year 2005 OTTAWA, Ontario – August 19, 2004 – MOSAID Technologies Incorporated (TSX:MSD) today announced financial results for the first quarter of fiscal 2005, ended July 23, 2004. As a result of adopting the fair value provisions of CICA Handbook section 3870,Stock-based compensation and other stock-based payments, on a retroactive basis, the Company has revised certain previously disclosed information in the balance sheet, results of operations and statement of cash flows, in accordance with Canadian generally accepted accounting principles. The Company has also changed the manner of presentation of interest income and interest expense in the statement of operations, both currently and for previous periods. Revenues for the first quarter of fiscal year 2005 were $9,255,000 compared to $5,148,000 in the first quarter of fiscal year 2004. Net earnings for the quarter was $92,000 or $0.01 per diluted share, compared to a net loss of $3,713,000 or $0.36 per diluted share a year ago. Before discontinued operations, related to the termination of the Semiconductor Division in September 2003, earnings for the quarter were $72,000 or $0.01 per diluted share compared with a net loss of $1,538,000 or $0.15 per diluted share a year ago. The Company’s cash balance and short-term marketable securities at the end of the first quarter was $41.5 million, an increase of $3.3 million over the $38.2 million at the end of fiscal year 2004. "We are pleased with our business performance in the first quarter," said George Cwynar, President and Chief Executive Officer of MOSAID. "Our Systems Division delivered another solid quarter of improved revenues and profitability while making good progress towards the next generation of tester products, and our Intellectual Property Division secured a lead customer for its memory controller offering. Finally, in MOSAID’s litigation against Samsung, we were successful with our sanctions motion in the New Jersey Court." Operating Highlights Court Granted Sanctions Against Samsung in Litigation In recent months, three hearings were held in the New Jersey District Court to consider MOSAID's motion for sanctions against Samsung. Filed in April 2004, MOSAID had requested a number of sanctions related to Samsung’s failure to deliver certain documentation, as required by law, in the discovery phase of the case. On July 8, 2004, Magistrate Judge Hedges granted the majority of MOSAID’s requested sanctions against Samsung. As a result of Samsung’s failure to deliver documentation and its destruction of email related to the case the following sanctions were imposed: a monetary penalty payable to MOSAID; an order that proof of infringement by MOSAID of certain representative Samsung parts of MOSAID’s choosing will determine infringement; an order that Samsung is precluded from challenging MOSAID’s expert evidence as to the operation of Samsung parts, to the extent that such challenges rest on any assumptions made in performing analysis on representative parts; and an order that the trial Jury should receive an instruction adverse to Samsung based on its destruction and non-production of emails. MOSAID is currently waiting for the final Court order concerning the text of the jury instruction, and the value of monetary sanctions that will be paid to MOSAID by Samsung. On August 10, 2004, Magistrate Judge Hedges granted MOSAID's request to delay the submission of expert reports, and the identification of asserted patent claims, until after the expected appeal of Judge Hedge's sanctions ruling by Samsung. Judge Hedges also vacated all scheduled dates in the case to accommodate the delay of expert reports. MOSAID believes that the trial date, which had been scheduled for December 7, 2004, may now be delayed by approximately three months. Fact discovery proceedings in the Infineon litigation are now largely complete and the next step will be the submission of expert reports. The case will eventually be transferred back to the Northern District of California for trial but the date of that transfer is unknown at this time. At the end of the first quarter, there were fifteen companies on notice for patent infringement and MOSAID is in licensing discussions with a number of these manufacturers. MOSAID has a total of 527 issued or pending patents in its portfolio. Design Licensing Group Adds to Portfolio of Semiconductor IP Products At the start of the first quarter, the Design Licensing group announced a lead customer for another new semiconductor IP product. The customer, a leader in advanced ASIC technology, signed a multi-use license for MOSAID’s complete memory controller solution. The design and tape-out of the QDR® II SRAM memory controller IP block is now complete and the product is available for licensing to other customers. Targeted at TSMC's 130nm process geometry, the memory controller solution includes MOSAID’s high-performance HSTL (High Speed Transceiver Logic) I/O library and integrated DLL (Delay Locked Loop) for an optimized overall system timing budget. MOSAID’s BIST (built in self-test) engine for embedded memories is also being added to the portfolio of IP products as a result of work with a lead customer. A contract with this major semiconductor manufacturer was announced at the end of fiscal year 2004 with the signing of an agreement to develop a high-speed embedded DRAM macrocell. The BIST engine is for use with embedded memories, including SRAM and DRAM, with or without redundancy, and can be used for embedded memory inside the die or on a port for testing off-chip memories. The BIST is a highly advanced, fully programmable engine, which includes a user-friendly test program instruction compiler. The MOSAID BIST engine is scheduled to be available for license in the second fiscal quarter. Systems Division Records Another Strong Profitable Quarter During the first quarter, the Systems Division business continued to improve, recording revenues of $6,260,000 and an operating profit of $1,437,000. Shipments of the MS4205 and MS4205ex test systems continue to reflect recovery in the memory markets and increased demand from semiconductor manufacturers to acquire high performance test capability for the latest high-speed Flash and DRAM memories. The Division increased its investment in new product development during the first quarter. Future products will target market requirements for increased data width and pin count, larger bitmap capacity and more logic test capability. Conference Call and Webcast About MOSAID
Founded in 1975, MOSAID is based in Ottawa, Ontario, Canada, with offices in Santa Clara, California; Newcastle upon Tyne, U.K; and Tokyo, Japan. For more information, visit the Company’s web site at www.mosaid.com. Forward Looking Information For more information, please contact:
MOSAID TECHNOLOGIES
INCORPORATED
See accompanying Notes to the Consolidated Financial Statements. MOSAID TECHNOLOGIES
INCORPORATED
See accompanying Notes to the Consolidated Financial Statements. MOSAID TECHNOLOGIES
INCORPORATED
3. Discontinued Operations The results of operations of the Semiconductor Division have been segregated in the accompanying interim consolidated financial statements. The results of discontinued operations are as follows:
MOSAID TECHNOLOGIES INCORPORATED 1. Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with Canadian generally accounting principles for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the full fiscal year ending April 22, 2005. The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements, except as follows: Hedging Relationships Effective April 24, 2004, the Company adopted Accounting Guideline 13, Hedging Relationships ("AcG-13"). AcG-13 establishes new criteria for hedge accounting and applies to all hedging relationships in effect for fiscal years beginning on or after July 1, 2003. To qualify for hedge accounting, the hedging relationships must be appropriately documented at the inception of the hedge and there must be reasonable assurance, both at the inception and throughout the term of the hedge, that the hedging relationship will be effective. Effectiveness requires a high correlation of changes in fair values or cash flows between the hedged item and the hedging item. The Company will comply with the requirements of AcG-13, such that any hedging relationships entered into will qualify for hedge accounting when the guideline becomes effective. All outstanding hedges that previously qualified for hedge accounting continue to qualify for hedge accounting. Stock-based compensation and other stock-based payments Effective April 24, 2004, the Company adopted the fair value provisions in CICA Handbook Section 3870, Stock-based compensation and other stock-based payments, on a retroactive basis. The recommendation requires the use of fair value methods for all awards to both employees and non-employees. Using the Black-Scholes option pricing model and amortizing the fair value on a straight-line basis, over the vesting period, the impact on previously published results is:
These statements should be read in conjunction with the Company’s audited consolidated financial statements prepared for the fiscal year ended April 23, 2004. Segmented disclosure As a result of reclassifying interest expense from operating expense to net interest income for both the current and comparative periods, the expense has been removed from segment profit and into the unallocated amounts. 2. Net Interest Income Net interest income comprises the following:
3. Discontinued Operations The results of operations of the Semiconductor Division have been segregated in the accompanying interim consolidated financial statements. The results of discontinued operations are as follows:
4. Earnings per Share The following is a reconciliation of the numerator and denominator of the basic and diluted per share computations:
For the 13 weeks ended July 23, 2004, 903,120 options were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company’s common stock during this period and were therefore anti-dilutive. For the 13 weeks ended July 25, 2003, 982,985 options were excluded from the calculation of diluted earnings per share as they were anti-dilutive. There were 996,995 and 982,985 options issued and outstanding as at July 23, 2004 and July 25, 2003 respectively. 5. Stock-based Compensation The Company has an employee stock purchase plan program whereby employees may elect to designate up to 5% of their annual salary to purchase shares of the Company at a 10% discount from the fair market value. The purchase price is deducted over a six month period via payroll. Also, the Company has an Employee and Director Stock Option Plan. The exercise price is no lower than the market price on the date of grant. Options granted under the Plan expire within a period of six years of granting, with vesting periods determined by the Compensation Committee. The Company employs a fair value method of accounting for all options issued to employees or directors on or after April 27, 2002. The fair value of options issued in the quarter was calculated using the Black-Scholes option pricing model and the following assumptions:
6. Business Segment Information Based upon the Company’s internal reporting structure, the following operating segments have been assigned:
The significant accounting policies of the above segments are the same as those described in Note 1. Intersegment sales are recorded at cost. General and administrative costs are allocated to the operating segments based upon estimates of usage. The Company has not included net interest income, foreign exchange gains or losses, unusual items, gains or losses of long-term assets or income tax expense in the determination of operating segment profit.
7. Comparative Amounts Certain of the comparative amounts have been reclassified to conform to the presentation adopted in the current year. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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