Financial: S3 Inc. Q3 1998 Results - Company Financial Information

Edge: Work-Group Computing Report, Nov 2, 1998

S3 Inc. (Nasdaq:SIII) Monday reported that net revenues for the third quarter of 1998 were $47.3 million compared to $119.6 million for the third quarter of 1997. Net loss was $35.4 million for the quarter, or $0.69 per diluted share, compared to net income for the same quarter last year of $4.4 million, or $0.08 per diluted share.

Included in the net loss are charges for restructuring, write-offs of older 2D and 3D inventory and write-offs of certain excess and obsolete capital equipment. These charges amounted to approximately $18.0 million or $0.35 per share. "During the third quarter, we continued to be severely impacted by softening of the Asia market. While we commenced shipments of our Savage3D product, its ramp was offset by the lower than expected demand of our older 2D and 3D products," said Terry Holdt, president and chief executive officer of S3 Inc. "Moving forward, we maintain a strong balance sheet that will enable us to continue investing in new desktop and mobile products." About S3 Inc. S3 Inc., founded in 1989 with headquarters in Santa Clara, is a premier supplier of multimedia acceleration hardware and its associated software. S3 is committed to applying its expertise in video, graphics and multimedia acceleration to create innovative and affordable products for the home, desktop and mobile markets.

       S3 Inc.
Statements of Operations
(In thousands, except per share data )
    (Unaudited )
       Three Months Ended   Nine Months Ended
          September 30,       September 30,
         1998      1997      1998      1997
Net sales                   $ 47,286  $119,604  $183,092  $334,448
Cost of sales                 55,206    86,191   168,842   225,717
Gross margin                  (7,920)   33,413    14,250   108,731
Operating expenses:
Research and development     19,752    20,057    60,119    60,028
Selling, marketing and
administrative              10,024    13,763    33,161    39,895
Write-off of acquired
in-process technology         --        --       8,000      --
Restructuring charge          6,109      --       6,109      --
Total operating expenses  35,885    33,820   107,388    99,923
Income (loss) from operations(43,805)     (407)  (93,138)    8,808
Gain on sale of manufacturing
joint venture                  --        --      26,561      --
Other income (expense), net      127      (737)   (4,058)   (1,008)
Income (loss) before income
taxes and equity in income
of manufacturing joint
venture                    (43,678)   (1,144)  (70,635)    7,800
Provision (benefit) for
income taxes                   --        (984)  (11,956)    2,270
Income (loss) before equity in
income of manufacturing
joint venture               (43,678)     (160)  (58,679)    5,530
Equity in income from
manufacturing joint venture
(including tax recovery
of $4,705)                   8,277     4,544    15,766    11,470
Net income (loss)           $(35,401) $  4,384  $(42,913) $ 17,000
Net income (loss) per share
-- basic                  $  (0.69) $   0.09  $  (0.84) $   0.35
Net income (loss) per share
-- diluted                $  (0.69) $   0.08  $  (0.84) $   0.33
Shares used in per-share
calculation -- basic        51,174    49,764    50,920    49,212
Shares used in per-share
calculation -- diluted      51,174    52,380    50,920    51,805
       S3 Inc.
Consolidated Balance Sheets
(dollars in thousands)
     (unaudited)
                     Sept. 30,   Dec. 31,
                       1998        1997
                    (unaudited)
ASSETS
Current assets:
Cash and investments                     $128,703   $117,670
Accounts receivable, net                   24,836     60,713
Inventories, net                           33,877     71,882
Prepaid expenses and other                 58,676     51,172
Total current assets             246,092    301,437
Property and equipment, net                 28,616     46,628
Production capacity rights                    --        4,800
Investment in joint venture                 80,794    104,465
Other assets                                52,746     35,524
Total                           $408,248   $492,854
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                         $ 29,329   $ 42,819
Notes payable                              16,877     26,717
Accrued liabilities                         9,974     10,987
Deferred revenue                               72     10,921
Total current liabilities         56,252     91,444
Notes payable                                 --        4,800
Other liabilities                           20,202     22,270
Total liabilities                 76,454    118,514
Convertible subordinated debentures        103,500    103,500
Stockholders' equity                       228,294    270,840
Total                           $408,248   $492,854