Corel Announces Profitable Fourth Quarter and Fiscal 1999: One-time Gain
Results in Third Consecutive Profitable Quarter
OTTAWA--(BUSINESS WIRE)--Jan. 18, 2000-- COREL(NASDAQ:CORL)
(TSE:COR.)
Corel Corporation (NASDAQ:CORL) (TSE:COR) today announced results
for its fourth quarter ended November 30, 1999. Revenues for the
fourth quarter of fiscal year 1999 were $60.9 million, compared to
$67.2 million in the fourth quarter of fiscal 1998. Net profit for the
quarter was $4.6 million or $0.07 per share fully diluted, compared to
a profit of $6.8 million or $0.11 per share in the same period last
year. Revenues for fiscal 1999 totaled $243.1 million compared to
$246.8 million in fiscal 1998. Net profit for the fiscal year 1999 was
$16.7 million or $0.26 per share fully diluted, compared with a loss
of $30.4 million ($0.51) or per share reported for fiscal year 1998.
All figures are reported in US currency.
Corel pre-announced December 22, 1999 that based on preliminary
estimates, the Company would report a loss of approximately $0.14 per
share and the results from operations were consistent with that
announcement. In the time following that announcement, the Company was
able to recognize the tax value of certain losses and investment tax
credits which had been deferred pending the outcome of a Revenue
Canada review of Corel's 1993 to 1995 taxation years.
"This review, which has been in progress for approximately three
years, precluded Corel from recognizing certain tax attributes which
had arisen in the taxation years subsequent to those under review,"
said Michael O'Reilly, Corel's executive vice president, finance and
chief financial officer. "It has now become possible to quantify these
amounts and as a result, Corel is able to report a positive adjustment
totaling $14.5 million for the fourth quarter of fiscal 1999."
Earlier this month, Mr. O'Reilly announced his intention to
resign as Corel's chief financial officer. Mr. O'Reilly has now agreed
to stay with Corel until June 30, 2000 as a financial consultant and
advisor.
As previously announced, Corel's operational results for the
quarter were negatively affected by sales below anticipated levels,
primarily in the North American retail channel for Corel's
productivity applications. Additionally, the Company incurred higher
than anticipated expenses in a number of areas including cost of goods
sold, advertising and selling, general and administrative (SG&A)
costs.
"Overall, Corel has made significant progress in restoring its
financial base while at the same time, maintaining the momentum of its
flagship CorelDRAW and WordPerfect brands," said Mr. O'Reilly. "It is
now in a strategic position to move forward aggressively to leverage
those strengths into the Linux marketplace."
Corel enjoyed strong inaugural sales of the new Corel(r) LINUX(r)
OS, totaling $3.2 million for the quarter.
"It should now be clear to everyone that Corel is financially
among the top Linux players," said Dr. Michael Cowpland, Corel's
president and chief executive officer. "Not only is Corel LINUX OS the
most popular Linux software download on the CNET site, it is also one
of the most popular Linux distributions among consumers. With Corel
WordPerfect 8 for Linux continuing to be the second-most popular Linux
download, we think this provides tremendous promise for the launching
of our Linux application suites in the next few months."
During the fourth quarter, Corel continued to expand and augment
its Linux strategy, ramping up its affiliates program and bringing
together tremendous expertise to make Corel a comprehensive,
end-to-end Linux products and services provider.
Deals begun in the fourth quarter and now completed include
LinuxForce, Newlix and OE/ONE.com, adding to existing relationships
with Rebel.com and GraphOn Corp.
"Corel's affiliates let us maintain our focus on providing the
best desktop Linux OS and the delivery of mainstream, marquee
applications for Linux such as WordPerfect and CorelDRAW," said Dr.
Cowpland. "At the same time, we are able to create tight integration
with all other elements of Linux from technical support to software
and hardware server needs, thin client connectivity and seamless
access between Linux and Windows applications and as of today, the
stellar opportunities in the Information Appliance arena."
4th Quarter 1999 Achievements
* In September, Corel announced the formation of a strategic
alliance with Inprise Corporation, to accelerate commercial
mainstreaming of Linux(r) technology. As part of the alliance, the
companies formed a research-and-development partnership to facilitate
the development of Corel's office productivity applications and
Inprise's application development tools and enterprise solutions for
the Linux operating system.
* In September, Corel entered into a licensing agreement with
Ultimatte Corporation. The agreement grants Corel the worldwide,
perpetual right to distribute the PC and Macintosh versions of
Ultimatte's KnockOut(tm) software application on a stand-alone basis
and as part of Corel applications.
* In October, Corel announced that it had signed a licensing
agreement with GraphOn Corporation to include GraphOn's WinBridge(tm)
web-enabling software in Corel applications. By adding WinBridge to
its applications, Corel can provide an instant deployment solution
that will allow users to access Corel's Windows(r) applications over
any network connection, including the Internet, regardless of the
operating system on their desktop.
* In November, Corel joined the fast-growing Application Service
Provider (ASP) Industry Consortium, an international advocacy group
dedicated to fostering greater understanding and guidelines for the
fast-emerging application service provider segment of the computer
industry.
* In November, Corel and FutureLink Corp. announced a pilot
program for Corel's new online initiative - subscription pricing via
the Internet. FutureLink will remotely host WordPerfect(r) Office 2000
so that FutureLink clients can purchase monthly rental licenses for
the software.
* In November, Corel Corporation announced that it had signed a
major bundling agreement with Toshiba in the European market. Corel(r)
WordPerfect(r) Suite 8 OEM was to be bundled on Toshiba's consumer
notebooks in Europe.
* In November, Corel announced that it had signed a deal to
transfer substantially all of its assets related to the CorelVIDEO(tm)
product line to simply.com Inc. The sale of CorelVIDEO completes the
business plan that Corel put into place in 1998 to concentrate on its
core technologies.
* In November, Corel Corporation announced the availability of
the much-anticipated Corel(r) LINUX(r) OS. Corel LINUX OS is a major
leap forward in creating a large desktop market for Linux, and Corel
launched a landmark version of the most user-friendly Linux OS
distribution to date.
* In November, Corel announced its first major Linux(r) OEM
alliance, which will see its Linux operating system, Corel(r)
LINUX(r), bundled with every computer motherboard package shipped
worldwide by the PC Chips group of companies. PC Chips will also ship
Corel(r) WordPerfect(r) 8 for Linux and Corel WordPerfect Suite 8 OEM
(for Windows(r)) with its motherboards.
* During the fourth quarter, Corel launched the following
products: Corel GALLERY(tm) 1,300,000, Corel GALLERY(tm) 380,000,
Corel Print Office(tm) 2000, Corel Print Office(tm) 2000 for
Macintosh(r), WordPerfect(r) Family Pack, Print House(tm) 2000 for
Macintosh(r), Corel(r) Custom Photo for the Macintosh(r) and Corel(r)
Custom Photo for the PC.
4th Quarter 1999 Awards
Corel products won 31 awards during the quarter. CorelDRAW 9 won
14 awards and Corel WordPerfect Office 2000 won six awards. A sampling
of the awards are as follows: CorelDRAW 9 won a Reader's Choice Award,
a Favorite Graphics Software award and an MVP Finalist award.
WordPerfect Office 2000 won an Editor's Choice award, a Gold award and
a Best Buy award.
In November, Corel Corporation won several awards at COMDEX/Fall
'99 on the strength of its new Linux(r) offerings and its core
Windows(r) applications. On CNET, one of the world's largest download
portals, the Corel LINUX OS is the most popular Linux download of any
kind.
Corel Corporation
Corel Corporation is an internationally recognized developer of
award-winning business productivity, graphics and operating system
solutions on the Windows(r), Linux(r), UNIX(r), Macintosh(r) and
Java(tm) platforms. Corel also develops market-leading, Web-based
solutions including applications, contents, e-commerce and online
services. For access to these services and more information go to
www.corel.com or www.corelcity.com. Corel is headquartered in Ottawa,
Canada. Corel's common stock trades on the NASDAQ Stock Market under
the symbol CORL and on the Toronto Stock Exchange under the symbol
COR.
This press release contains statements that are forward-looking
as that term is defined by the United States Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations that are subject to risks and uncertainties. Actual
results will differ due to factors such as shifts in customer demand,
product shipment schedules, product mix, competitive products and
pricing, technological shifts and other variables. Readers are
referred to Corel's most recent reports filed with the Securities and
Exchange Commission.
Corel, WordPerfect, CorelDRAW, Corel LINUX OS, PHOTO-PAINT, Corel
VENTURA Publisher, Print House, Print Office, Gallery, Custom Photo
and the Go Further logo are trademarks or registered trademarks of
Corel Corporation or Corel Corporation Limited. Linux is a registered
trademark of Linus Torvalds. UNIX is a registered trademark of The
Open Group. All other product names are trademarks of their respective
companies. All other brands and products referenced herein are the
trademarks or registered trademarks of their respective holders.
COREL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND YEAR ENDED NOVEMBER 30, 1999
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (US Dollars,
000s omitted except per share data)
Quarter ended Year Ended
November 30 November 30
1999 1998 1999 1998
Sales $ 60,932 $ 67,242 $ 243,051 $ 246,827
Cost of sales 18,398 14,879 59,516 51,561
Gross profit 42,534 52,363 183,535 195,266
Expenses:
Advertising 15,606 11,454 47,964 41,826
Selling, general and
administrative 22,295 20,504 82,229 77,736
Research and development 3,523 12,024 40,049 71,935
Depreciation and
amortization 2,046 1,923 6,443 12,368
Restructuring charge - - - 15,880
Settlement proceeds - - (6,342) -
Loss (gain) on foreign
exchange (511) 236 (246) 911
42,959 46,141 170,097 220,656
Income (loss) from operations (425) 6,222 13,438 (25,390)
Interest expense (income) (93) 118 190 1,112
Income (loss) before the
undernoted (332) 6,104 13,248 (26,502)
Income tax expense
(recovery) (5,221) (678) (3,946) 3,946
Loss on equity investment 307 - 478 -
---------------------------------------------------------------------
Net income (loss) 4,582 6,782 16,716 (30,448)
Deficit beginning
of period (163,470) (182,386) (175,604) (145,156)
---------------------------------------------------------------------
Deficit end of period $(158,888) $(175,604) $(158,888) $(175,604)
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per share:
Net income (loss)
per common share
- Basic $ 0.07 $ 0.11 $ 0.27 $ (0.51)
- Fully diluted 0.07 0.10 0.26 (0.51)
Average number of
common shares
outstanding (000s)
- Basic 64,213 59,401 62,194 59,433
- Fully diluted 66,337 67,755 65,100 59,433
COREL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
AS AT NOVEMBER 30, 1999
CONSOLIDATED BALANCE SHEETS
(US Dollars, 000s omitted)
---------------------------------------------------------------------
November 30
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 18,021 $ 22,393
Short-term investments - 2,113
Accounts receivable - Trade 54,770 45,789
- Other 3,954 877
Inventory 13,567 17,098
Income taxes recoverable 5,135 -
Deferred income taxes 1,642 2,495
Prepaid expenses 2,042 4,618
Total current assets 99,131 95,383
Investments 2,873 -
Capital assets 49,697 44,776
Total assets $ 151,701 $ 140,159
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 50,284 $ 58,209
Current portion of Novell obligations 10,594 11,800
Income taxes payable - 7,549
Deferred revenue 18,472 17,933
Total current liabilities 79,350 95,491
Novell obligations 7,985 16,085
Shareholders' equity:
Share capital 222,155 203,088
Contributed surplus 1,099 1,099
Deficit (158,888) (175,604)
---------------------------------------------------------------------
Total shareholders' equity 64,366 28,583
Total liabilities and shareholders' equity $ 151,701 $ 140,159
COREL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND YEAR ENDED NOVEMBER 30, 1999
CONSOLIDATED STATEMENTS OF CASH FLOWS
(US Dollars, 000s omitted)
Quarter ended Year Ended
November 30 November 30
1999 1998 1999 1998
Cash and cash equivalents provided by (used for):
Operations:
Net income (loss) $ 4,582 $ 6,782 $ 16,716 $ (30,448)
Items which do not
involve cash or cash
equivalents:
Depreciation and
amortization 4,852 5,812 19,117 25,689
Loss on equity
investments 307 - 478 -
Write-down of
short-term investment - - - 1,908
Gain on sale of
short-term investment - - (809) -
Deferred income taxes - (698) 853 (142)
Restructuring charges - - - 3,086
Changes in non-cash
working capital (12,957) (1,022) (26,470) 16,183
Cash flows from (used in)
operating activities (3,216) 10,874 9,885 16,276
Financing:
Issue of share capital 6,055 209 12,767 209
Shares purchased for
cancellation - - - (987)
Repayment of Novell
obligations (2,306) (2,534) (9,306) (9,659)
---------------------------------------------------------------------
Cash from (used in)
financing activities 3,749 (2,325) 3,461 (10,437)
Investments:
Proceeds on sale of
short-term investment - - 2,922 1,624
Purchase of equity
investment - - (1,561) -
Purchase of capital
assets (6,327) (4,121) (19,198) (10,359)
Proceeds on disposal
of assets 23 226 119 305
Cash flows used in
investing activities (6,304) (3,895) (17,718) (8,430)
Net increase (decrease) in
cash and cash equivalents (5,771) 4,654 (4,372) (2,591)
Cash and cash equivalents
at beginning of year 23,792 17,739 22,393 24,984
Cash and cash equivalents
at end of period $ 18,021 $ 22,393 $ 18,021 $ 22,393
*T
CONTACT:
Corel Corporation
John Hladkowicz, 613/728-0826 ext. 1194
E-mail: johnh@corel.ca
Website: www.corel.ca
or
Corel Corporation
Stefania Allevato (Canada), 613/728-0826 ext. 5003
E-mail: stefaniaa@corel.ca
or
Corel Corporation
Catherine Hughes (US), 613/728-0826 ext. 1659
E-mail: catherineh@corel.ca
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