Corel Corporation Announces First Quarter Results - Company Financial Information

Edge: Work-Group Computing Report, March 27, 2000

Corel Corporation (Nasdaq:CORL) (TSE:COR) Monday announced results for its first quarter ended February 29, 2000.

Revenues for the first quarter of fiscal year 2000 were $44.1 million, compared to $40.3 million in the first quarter of fiscal 1999. Net loss for the quarter was $12.4 million or ($0.19) per share fully diluted (including a gain on investment of $0.10 per share from the partial sale of its equity interest in GraphOn, Inc.), compared to a net loss of $14.6 million or ($0.24) per share in the same period last year. Cash at the end of the quarter stood at $29.3 million. All figures are reported in US currency.

"Based on the prospects for revenue and the cost structure in place at Corel, we expect that results for the next two quarters will mirror those experienced in this quarter," said Mitch Desrochers, vice president of finance and controller of Corel Corporation. "We continue to examine our cost structure while focusing more resources on emerging markets such as Linux."

"With an improved cash position since Q4 1999, and profitable investments, Corel is positioned to fund future growth," said Dr. Michael Cowpland, president and chief executive officer of Corel Corporation. "Over the past two years, we've taken steps to leverage open technologies for the Internet. The early results have been promising, and we are continuing to take advantage of these fast growing market segments." Q1 Highlights

- Corel and Inprise/Borland entered a definitive merger agreement. The process to finalize the merger is underway and both companies are excited about the opportunity to work together.

- WordPerfect Office 2000 for Linux, which has now been released to manufacturing and will be on store shelves in April, was previewed to enthusiastic audiences at LinuxWorld Expo in New York.

- Corel PHOTO-PAINT for Linux and CorelDRAW for Linux were previewed at Seybold Seminars in Boston. This was one of the first opportunities for graphics enthusiasts and Linux users to see Corel's award-winning graphics applications in action on the Linux platform. Corel made strategic investments in LinuxForce Inc., Newlix, and OE/One.com to support current and future initiatives by leveraging the core competencies of these partners.

- The CorelCity.com portal went live with a wide array of services and information.

- Corel products continued to win accolades, with over 25 industry awards in the first quarter of 2000 alone, including a Reader's Choice Award for Best Service and Support from Computer Currents, USA.

- WordPerfect Office 2000 Small Business Edition was launched, offering a comprehensive solution for small business users.

- CorelDRAW 8 Limited Edition for Macintosh was launched as a free download.

- In a worldwide OEM deal with Agfa, Corel Print Office 2000 for the PC and Mac Multilingual versions will be bundled with Agfa's new SnapScan e40, SnapScan e50 scanners and CL18 digital cameras.

This press release may contain certain statements that are forward looking as that term is defined by the US 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 customer demand, product ship schedules, PC shipment growth, product mix, competitive products and pricing, technological shifts and other issues discussed in the company's Report on Form 10-K. Corel Corporation

Corel Corporation is an internationally recognized developer of award-winning graphics and business productivity applications. Development of market-leading products such as the CorelDRAW line of graphics applications and the Corel WordPerfect Suite of business tools is continually evolving to meet the demands of the corporate, retail and academic markets. Committed to performance, compatibility, value and open standards, Corel develops products for the Windows, Macintosh, UNIX, Linux and Java platforms. Corel's common stock trades on The NASDAQ Stock Market under the symbol CORL and on the Toronto Stock Exchange under the symbol COR. For more information visit Corel's Web site at (www.corel.com).

Corel Corporation
Consolidated Balance Sheets
(Unaudited)

                           February 29, 2000  November 30, 1999
                                   (in thousands of US$)

Assets
Current assets:
  Cash and cash equivalents         $  29,262          $  18,021
  Accounts receivable
    Trade                              28,861             54,770
    Other                               5,566              3,954
  Inventory                            10,573             13,567
  Income taxes recoverable              2,568              5,135
  Deferred income taxes                 1,775              1,642
  Prepaid expenses                      2,474              2,042

Total current assets                   81,079             99,131

Investments                             3,379              2,873

Capital assets                         47,858             49,697

Total assets                        $ 132,316          $ 151,701

Liabilities and shareholders' equity Current liabilities:
  Accounts payable and accrued
   liabilities                      $  45,713          $  50,284
  Current portion of Novell
   obligations                          9,178             10,594
  Deferred revenue                     16,122             18,472

Total current liabilities              71,013             79,350

Long-term portion of Novell
 obligations                            7,422              7,985

Shareholders' equity
  Share capital                       224,071            222,155
  Contributed surplus                   1,099              1,099
  Deficit                            (171,289)          (158,888)
Total shareholders' equity             53,881             64,366
Total liabilities and shareholders'
 equity                             $ 132,316          $ 151,701

Corel Corporation
Consolidated Statements of Operations
and Retained Deficit
(Unaudited)
                            For the quarter ended February 29/28
                                         2000               1999

                     (in thousands of US$, except per share data)

Sales                               $  44,141          $  40,306
Cost of sales                          14,989             11,560
Gross profit                           29,152             28,746

Expenses:
  Advertising                          12,726              8,771
  Selling, general and administrative  21,904             18,939
  Research and development             11,447             13,460
  Depreciation and amortization         1,733              1,630
  Loss (gain) on foreign exchange          (6)               249
                                       47,804             43,049
Loss from operations                  (18,652)           (14,303)

Gain on investment                      8,940                  -
Interest income (expense)                  17               (137)
Income loss before the under noted     (9,695)           (14,440)

Income tax expense                     (2,442)              (199)
Share of loss in equity investee         (264)                 -
Net loss                              (12,401)           (14,639)

Deficit beginning of year            (158,888)          (175,604)
Deficit end of year                 $(171,289)         $(190,243)

Earnings per share                  $   (0.19)         $   (0.24)

Weighted average number of Common
 shares outstanding (000s):            65,653             60,162

Corel Corporation
Consolidated Statements of Cash Flows
(Unaudited)

                            For the quarter ended February 29/28
                                         2000               1999
                                   (in thousands of US$)

Cash and cash equivalents provided by (used for):

Cash flows from operating activities:
  Net income (loss)                 $ (12,401)         $ (14,639)
  Items which do not involve cash
   or cash equivalents:
     Depreciation and amortization      4,559              4,440
     Deferred income taxes               (133)               161
     Equity loss in investments           264                  -
  Gain on investment                   (8,940)                 -
  Decrease in accounts receivable      24,297             11,883
  Decrease in inventory                 2,994              2,226
  Decrease (increase) in prepaid
   expenses                              (432)             2,362
  Decrease in accounts payable and
   accrued liabilities                 (4,571)            (9,215)
  Decrease in income taxes recoverable  2,567                  -
  Decrease in income taxes payable          -             (4,064)
Increase (decrease) in deferred revenue(2,350)             1,603

Cash from (used in) operating activities5,854             (5,243)

Cash flows from financing activities:
  Issue of share capital                1,916              3,750
  Reduction of Novell obligations      (1,979)            (2,054)
Cash from (used in) financing activities  (63)             1,696

Cash flows from investing activities:
  Purchase of investments                (770)            (3,351)
  Proceeds on disposal of investment    8,940                  -
  Purchase of capital assets           (2,720)            (3,572)
  Proceeds on disposal of assets            -                 16
Cash from (used in) investing
 activities:                            5,450            (6,907)

Net increase (decrease) in cash and
 cash equivalents                      11,241            (10,454)

Cash and cash equivalents at beginning
 of year                               18,021              24,506
Cash and cash equivalents at end
 of year                            $  29,262           $  14,052