As of the fourth quarter of fiscal 2001, ATI has revised its practices regarding the accounting treatment of sales incentives in anticipation of new standards issued by the Emerging Issues Task Force of the Financial Accounting Standards Board (FASB).

This has the effect of reducing the Company’s revenues as well as selling expenses, but has no effect on earnings. Further information with regard to this reclassification can be found in the Notes to the Financial Statements attached.

All current and historical amounts quoted in this release, as well as the accompanying Management’s Discussion & Analysis (MD&A) and Financial Statements, reflect this new accounting treatment.

Revenues during the quarter declined 6.7 percent to (US) $229.1 million from the third quarter of fiscal 2001, while the gross margin improved 5.5 percentage points to 29.6 percent. Total operating expenses of (US) $88.3 million decreased 2.7 percent in the fourth quarter versus the previous quarter, and were 15.4 percent lower than the fourth quarter of fiscal 2000. Operating expenses, excluding intangibles, were (US) $67.2 million, 3.5 percent higher versus the previous quarter, but 5.0 percent lower than the same period a year ago. The unadjusted net loss in the fourth quarter of this fiscal year

was (US) $11.6 million or (US) $0.05 per share, compared to an unadjusted net loss of (US) $45.2 million, or (US) $0.20 per share for the same period a year ago.

For fiscal 2001, ATI revenues declined 19.1 percent to (US) $1.04 billion, largely as a result of the worldwide slowdown in PC sales. The adjusted net loss for the year was (US) $16.3 million or (US) $0.07 per share. For fiscal 2001, the unadjusted net loss was (US) $54.2 million or (US) $0.23 per share.

Despite the PC slowdown, we are continuing to deliver on the most aggressive schedule of new product and technology introductions in ATI’s history, said David Orton, President & Chief Operating Officer, ATI Technologies Inc. We have successfully refocused the business, changed our strategy to partner with third-party board makers and put a highly experienced management team in place. Our growth will be driven by an expanding footprint in the PC market through increased desktop and workstation market share, the introduction of new technology in the integrated market as well as our participation in the consumer game console space with Nintendo’s GAMECUBEÆË.

As of August 31, 2001, ATI’s working capital and cash position continued to strengthen

The Company’s cash position increased by almost (US) $60 million to (US) $216.5

million as of August 31, 2001, while working capital of (US) $323.6 million was (US) $2.2 million higher than the previous quarter. Inventories declined a further (US) $41.1 million during the quarter to end the year at (US) $99.0 million. Cash generated from operations during the fourth quarter was (US) $70.3 million.Our new generation of RADEONÆË products, complemented by the faster overall pace of product introductions, are creating an excellent foundation for ATI to increase its marketshare, said K.Y. Ho, Chairman & Chief Executive Officer, ATI Technologies Inc. We expect our desktop market position to improve, and we’re already seeing strong momentum with recent commercial design wins at Dell, Hewlett-Packard and IBM. With this, and Nintendo’s GAMECUBE delivering royalty revenue early in this new fiscalyear, ATI is well positioned for fiscal 2002.

ATI sales for the fourth quarter declined 6.7 percent to (US) $229.1 million, compared to the third quarter, and were 17.9 percent lower than the fourth quarter a year earlier.

Fourth quarter 2001 revenues were affected primarily by the shift from the delivery of boards to the delivery of chips into the SI channel, as well as by slower mobile sales.

Compared to fourth quarter of fiscal 2000, the decline was primarily the result of a continuing worldwide slowdown in PC sales.

For the 2001 fiscal year, revenues were (US) $1.04 billion, a 19.1 percent decline from fiscal 2000. This was primarily due to worldwide softness in computer sales and the shift to integrated graphics solutions.

Gross margins for the fourth quarter improved to 29.6 percent of sales, compared to 24.1percent in the third quarter and 20.0 percent in the same quarter a year earlier. The quarter over quarter improvement occurred primarily because of a richer mix of chips and lower costs. For fiscal 2001 versus fiscal 2000, product mix and lower cost memory,particularly during the third and fourth quarter, contributed to gross margin improvement.

Total operating expenses, excluding amortization of intangibles, were (US) $67.2 million, or 3.5 percent higher than the third quarter, but 5.0 percent lower than the same quarter a year earlier. Year over year, total operating expenses, excluding amortization of intangibles, rose (US) $13.3 million or 5.3 percent to (US) $262.3 million in fiscal 2001 over fiscal 2000.

Total operating expenses declined slightly in the fourth quarter to (US) $88.3 million from the third quarter and were 15.4 percent below the fourth quarter of fiscal 2000.

Amortization of intangibles declined substantially in the second half of fiscal 2001 as the Company completed its amortization of intellectual property assets from the acquisition of ArtX.

For fiscal 2001, total operating expenses increased 23.2 percent to (US) $376.8 million from fiscal 2000, primarily due to increases in amortization of intangible assets from theacquisition of ArtX. ATI experienced increased expense associated with new product development during the year as it prepared for the launch of several new products.

Additional operating expenses resulted from the acquisition of FIRE GL. The Company continues to undertake initiatives to reduce its expenses, primarily by targeted reductions through streamlining in both Europe and Canada and through review of its R&D efforts.

In the fourth quarter of fiscal 2001, ATI’s unadjusted net loss was (US) $11.6 million or (US) $0.05 per share, compared with an unadjusted net loss of (US) $27.0 million or (US) $0.12 for the third quarter, and an unadjusted net loss of (US) $45.2 million or (US) $0.20 for the fourth quarter a year ago. The improvement in unadjusted earnings has come with declines in amortization of intangible assets and with increases in gross margins.

ATI’s unadjusted net loss for fiscal 2001 was (US) $54.2 million, compared to an

unadjusted net loss of (US) $69.3 million in fiscal 2000. Adjusted net earnings for the fourth quarter were (US) $2.2 million or (US) $0.01 per share on a fully diluted basis, which improved compared to an adjusted net loss of (US) $4.2 million or (US) $0.02 per share for the previous quarter, primarily a result of increased gross margin.

SOURCE: COMPANY PRESS RELEASE