ATI Cruises Past Fourth-Quarter Estimates - TheStreet

Updated from 8:14 a.m. EDT

Graphics-chip maker

ATI Technologies


beat earnings and revenue estimates for the fourth quarter Friday and tweaked up guidance for the first, saying all of its product lines were delivering solid results. But the company also said it found problems in its revenue-recognition policies and restated results going back three years.

The stock slid 62 cents, or 3.8%, to $15.66 in midday trading. But one analyst, who asked not to be named, characterized the post-results selloff as merely the result of the very high expectations leading up to the call, shrugging off the effect of the earnings restatement. (His company has a banking relationship with ATI.)

"You had a couple analysts at $380 million, $382 million

for the just-finished quarter, so you get whisper numbers. The guidance isn't within that excessive nature. There's no weakness in the company at all, it's more that pent-up expectations are being realigned," he said.

Markham, Ont.,-based ATI earned $22.3 million, or 9 cents a share, on revenue of $380.7 million in the quarter ended Aug. 31, compared with a loss of $34.6 million, or 15 cents a share, on revenue of $222.9 million last year. Excluding investment gains, goodwill amortization and other items, the company earned $29 million, or 12 cents a share, in the latest quarter.

Analysts surveyed by Thomson First Call were predicting earnings of 10 cents a share on revenue of $364.5 million in the latest quarter.

ATI's gross margin was 35.6% in the fourth quarter, up 3 percentage points from the third. The company said all of its product lines contributed to revenue strength and margin expansion in the quarter.

The company puts first-quarter revenue at $400 million to $430 million and adjusted net income of 12 cents per share or "marginally higher" in the first quarter. The consensus analyst estimate was for revenue of $400 million and earnings of 13 cents a share, according to Thomson First Call.

ATI also disclosed an adjustment to its revenue-recognition policy as applied to shipment of products to customers, saying it was correcting a timing issue "to more clearly identify the point in the shipping process when the risk and rewards of ownership have been transferred to the customer."

The restatement cut revenue in the three months ended Aug. 31, 2002, to $222.8 million from $239.5 million and the widened the loss to 15 cents a share from 14 cents. Similar changes were recorded in the years to August 2002 and August 2001.