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Information Regarding Pro Forma Results of Operations

20 April 2003

On April 17, 2003, we announced our operating results for the three and six month periods ended March 31, 2003 in accordance with generally accepted accounting principles ("GAAP"). The Securities and Exchange Commission recently finalized rules regarding the use of non-financial measures and although pro forma financial reporting is allowed, we elected not to include pro forma information in our financial press release for the three months ended March 30, 2003 and our guidance. In order to clarify our financial results for the three and six month periods ended March 31, 2003, and provide future guidance in a manner consistent with previous financial press releases, guidance updates and earnings conference calls, we have included a pro forma financial reconciliation to our Statements of Operations for the three and six month periods ended March 31, 2003 and a pro forma reconciliation to our financial guidance for the three months ending June 30, 2003 and fiscal year ending September 30, 2003 to help investors understand our operating results. The Statements of Operations for the three and six month periods ended March 31, 2003 included herein are consistent with information provided in our previous press releases and the guidance included herein is consistent with guidance provided in our March 4, 2003 press release and provided on our April 16, 2003 conference call.

Historical Results

GAAP Results

Net income for the three months ended March 31, 2003 was $1.2 million, or $0.06 per diluted share. The net loss for the three months ended March 31, 2002 was $954,000, or ($0.06) per diluted share. Net income for the three months ended March 31, 2003 included charges of $520,000 for in-process research and development, $907,000 for amortization of purchased intangibles and $59,000 of stock-based compensation expense. The net loss for the three months ended March 31, 2002 included charges of $492,000 for amortization of purchased intangibles and a provision of $1.2 million for our unused facility lease.

Net income for the six months ended March 31, 2003 was $3.4 million, or $0.17 per diluted share. The net loss for the six months ended March 31, 2002 was $836,000, or ($0.05) per diluted share. Net income for the six months ended March 31, 2003 included charges of $520,000 for in-process research and development, $1.4 million for amortization of purchased intangibles and $59,000 of stock-based compensation expense. The net loss for the six months ended March 31, 2002 included amortization of purchased intangibles of $984,000 and a provision of $1.2 million for our unused facility lease.

Pro Forma Results

Pro forma net income for the three months ended March 31, 2003 was $1.8 million, or $0.09 per diluted share. The pro forma net income for the three months ended March 31, 2002 was $464,000, or $0.03 per diluted share. Pro forma net income for the three months ended March 31, 2003 excluded charges of $520,000 for in-process research and development, $907,000 for amortization of purchased intangibles, $59,000 of stock-based compensation expense and a tax effect of $(919,000). The pro forma net income for the three months ended March 31, 2002 excluded charges of $492,000 for amortization of purchased intangibles, a provision of $1.2 million for our unused facility lease and a tax effect of $(271,000).

Pro forma net income for the six months ended March 31, 2003 was $3.5 million, or $0.18 per diluted share. The pro forma net income for the six months ended March 31, 2002 was $877,000, or $0.05 per diluted share. Pro forma net income for the six months ended March 31, 2003 excluded charges of $520,000 for in-process research and development, $1.4 million for amortization of purchased intangibles, $59,000 of stock-based compensation expense and a tax effect of $(1.9) million. Pro forma net income for the six months ended March 31, 2002 excluded amortization of purchased intangibles of $984,000, a provision of $1.2 million for our unused facility lease and a tax effect of $(468,000).

Business Outlook

GAAP Information

We estimate our revenue will be $17.4 million for the three months ending June 30, 2003 and $65.2 million for the fiscal year ending September 30, 2003. We estimate our net income will be $1.2 million, or $0.06 per diluted share, for the three months ended June 30, 2003 and $6.5 million, or $0.31 per diluted share, for fiscal 2003.

Pro Forma Information

We estimate our pro forma revenue will be $17.4 million for the three months ending June 30, 2003 and $65.2 million for the fiscal year ending September 30, 2003. Our pro forma revenue is unchanged from our GAAP estimated revenue. We estimate our pro forma net income will be $1.9 million, or $0.09 per diluted share, for the three months ended June 30, 2003 and $7.6 million, or $0.37 per diluted share, for fiscal 2003. Our estimated pro forma net income for the three months ended June 30, 2003 includes amortization of intangibles from acquisitions of $1.5 million, $150,000 of stock-based compensation expense and a tax adjustment of $(992,000). Our estimated pro forma net income for fiscal 2003 excludes $520,000 of in-process research and development, amortization of intangibles from acquisitions of $4.4 million, stock-based compensation expense of $325,000 and a tax effect of $(4.1) million.

Use of Non-GAAP Financial Measures

The above information includes financial measures for net income (loss) and net income (loss) per share that exclude certain non-cash charges and were not calculated in accordance with GAAP. These measures differ from GAAP in that net income (loss) excludes the amortization of intangible assets from acquisitions, a one time charge for in-process research and development, a one time charge for the lease on our former facility and stock-based compensation expense for stock options in connection with our acquisition of NurLogic Design, Inc.

These non-GAAP adjustments are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses that we believe are not indicative of our core operating results. The non-GAAP measures are included to provide investors and management with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a more consistent basis for comparison between quarters. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. In addition, since we have historically reported non-GAAP results to the investment community, we believe the inclusion of non-GAAP numbers provides consistency in our financial reporting. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

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Artisan Components is a registered trademark and Process-Perfect is a trademark of Artisan Components, Inc. All other trademarks or registered trademarks are the property of their respective owners.





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