Atari Corporation Annual Report 1990

24 Pages·1991·2.3 MB·English

by  Atari Corporation

1990
ANNUAL REPORT
Profile
AtariCorporationisoneofthelargestmanufacturersofpersonal
computersandvideogamesystemsintheworld.Throughcreative
application ofadvanced technoiogiesy the Company offers its
customersa widerangeofcomputersandentertainmentgame
systems. The Company alsoproduces an expandmg library of
computerandvideogamesoftwareyOSwellasperipheralsand
accessoriesthataresoldirtalmosteverymajorcountryintheworld.
Atanisamulti-nationalcompanyemployingapproximately1260
peoplethroughouttheworld. Corporateheadquarters^ mcludmg
compterandvideogameproductdesi^arelocatedinSunnyvak
California.R&DcentersarelocatedintheUnitedStates,England,
Japan,andTaiwan.ManufacturingiscarriedoutinTaiwan,Japan,
and by various subcontractors m theFarEast The Company
operatesthroughwhollyownedsubsidiariesinAustralia,Austria
Belgium,Canada,Denmark,France,Germany,HongKong^Israel,
Italy, Japan, Mexico, theNetherlands, Norway, Spain, Sweden,
Switzerland, Taiwan,theUnitedKingdom,andtheUnitedStates.
To Our Shareholders
Duringtheyear 1990,Atari Corporationimproveditsbalance sheetand
tooksteps toreduceinventory andoperatingexpenses. Whileoursubsidiaries
inEuropeshowedoverallsalesgrowthwithgoodincreases inthe United
Kingdom andFrance, ourbusiness inNorthAmericacontinuedtoexperience
severe competitioninthevideogameandcomputermarkets andsaleswere
downin 1990.
FortheyearendedDecember31, 1990, netincomewas $14.9million
onsalesof$411.5 million. Thiscompareswithnetincomeof$4.0millionon
salesof$423.6millionin 1989. Duringthesecondhalfof 1990, the Company
repurchasedapproximately40% ofits 5 convertiblesubordinated
debentureswhichresultedinagainof$21.1 million. Inthefourth quarter
of 1990, the Companyprovidedsignificantinventory reserves, including
its traditionalU.S. videogameproducts, to reflectcurrentmarketvalue. In
addition, havingsubstantially completeditsliquidationoftheremaining
assets andliabilitiesofits discontinuedoperations, excessreserveswere
adjustedindiscontinuedoperationsof$14.6million. Ourperformancein
1990wasdisappointingfrom asalesandoperatingprofitpointofview.
Howeverasaresultofthereasonsabove, theCompany'sbalancesheet
improvedwhichresultedinnetincomeof$14.9millionfortheyear.
Net Income
(inmillions)
Atari Corporation 1
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Weare investinginnewproductR&D andthisshouldhelp positionthe
Company intheyearstocome. Wearealso concentratingonreducingour
operatingcostsbyvariousmeansincludingtheexpansionofindependent
subcontractorsforproductionpurposes.
Inthethirdquarterof1990, AtaristartedshippingtheAtariTT030™
personalcomputer, basedonthepowerfulMotorola®MC68030™ micro-
processor. TheTT030, alongwiththe MEGASTE™ a68000basedcomputer,
,
addadvancedproducts to ourflagship line ofpersonalcomputers. The STE™
andTT™ linecontinues to attracttop software developersthroughoutthe
worldandwe arecontinuingto developnewhardwareandsoftwareforthis
family ofproducts. AttherecentHannoverFair(March 1991)inGermany, the
AtariST™ compatibleNotebookportableandtheinnovativeAtariSTylus™
portablewereintroduced. Thetwomachineshavelongbattery life andthe
AtariSTylus features apenorientedoperationwith characterrecognition.
As aresultofournewmarketingapproach andalowerretailpricepoint,
theAtariPortfolio®, ouronepoundportableP.C. advancedorganizer, is doing
well. New Portfolio softwaretitles arebeingreleasedin 1991 which should
enhancethe Portfolio'spositioninthe marketplace. TheAtarilineofMS-DOS®
compatibles sufferedfrom acontinuingsevereshortageofIntel®80386
microprocessors. Withrecentproductannouncementsinthe80386market-
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2
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place, wehope thatthis shortagewillsubside duringthesecondhalfof 1991
andthatwe canreestablishthis lineinour distributionnetwork.
Inourvideogamebusinesswe areverypleasedwiththe consumer
response to the new marketingcampaign andlowerretailpricepoints ofthe
AtariLynx™ as announcedattheJanuary 1991 ConsumerElectronicsShow.
As aresultofthereleaseofonly 12 titles during 1990, andthehigherlaunch
price, sales oftheLynxwereslow. However,with thenewmarketing
campaignandtheplantomake availableforsaleover40titlesin 1991,we
expectamuchbroadermassmarketappeal. TheAtari 2600®and7800™
continueto sellwellinEuropewhilethemarketforthesetwoproducts in
NorthAmericais extremely slow. New table topvideogameconsoles are
plannedforintroductionin 1992
Whilewelookat 1991 with caution dueto theworldwide economic
downturn, we are confidentthat ourpresentandfutureproductswillbewell
received. Thankyou allforyourcontinuedsupport.
SamTramiel, President
Retouche Professional by 3K Computerbildprovides leading
technologyforprofessionalpreparation ofmaterialsforprinting.
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The Atari TT030 displays an easier
than evergraphic interface.
TheAtariTT030 system, whichbeganshippingduringthefalloflast
yearhasbroughttothemarketplaceanewlevelofperformanceindesktop
publishing, high speedgraphics, andprofessionalimageprocessing.
Thepower, speed, andsuperbresolutionoftheTT030, enhancedby
itsMotorolaMC68030 CPU runningat 32 MHz, enables theAtarisystem to
professionally handle thepreparationofmaterials forprintinganddesktop
publishingsoftware. Finalresults, which determine computer selection atthe
outset, meet themost demandingstandards ofexpertlithographers.
Thegraphsillustratedonpageoneofthisreportwerecreatedwith
SciGraph™ ahigh-endgraphingandvectordrawingprogram from Scilab.
,
Thecaptions, alongwith allofthereporttextandfinancialdatainthisbook
aretheproductofDeskSef" II, from G.O. Graphics, Inc. Thisprogram contains
texteditingandpagelayoutcapabilities. Print-ready outputwasproducedon
the Compugraphic®8400 typesettingsystemusingG.O. Graphics' Typesetter
Driver Option'" cardinterface.
Atari Corporation
Desk File Functions Quantize HIDI Flags Options Edit Copy
NOTATOR" fivm C-LAEP is an all encompassingMIDI
composition andproduction system.
Settingtextintooraroundanirregularshapeorimagehas alwaysbeen
atedious, timeconsumingeffortby traditionalmethods. DeskSetIImakes
iteasy andsetsnew standardsforoutstandinggraphicpresentations.
RetoucheProfessional™ is astate-of-the-artimageprocessingpackage
developedby 3KComputerbild. Itprovides 256levels ofgray tones. Halftones
areimpeccable. Controls forelegantcontrastsandbrightness arecomple-
mentedby anextensiverange offilters to achieve artisticeffects. Thisprogram
offers a "jobs" feature fororganizingscannedimages, masks, type, andline
artforassembly ofdistinctelementsintocombinedphotomontages. There
areover 120 selectablehalftonescreenstomatchtheappropriatescreenangle
anddotpatternforaparticularoutput device andadesiredprintingpress.
Retouche CD"; acolordesignprogram, is alsoavailable.
Atari Corporation 5
ReflectingthepowerandeaseofuseofthenewAtarisystemisits
thoroughlydetailedgraphicuseriitorfaca Anoperatorcanactually custom-
izeon-saeeniconsandkeytx)ardequivalents,makingdataorganizationmore
*
convenientthanever.
TheessenceofAtari'sadvancedtechnology^ remainsits TOS® operating
system. Itprovides thebroadesthorizonforcreativelicenseinpersonal
computingandinthe arts. Inadditionto qualityprint output, Atari computers
continueto generate the contemporary sounds ofmusicians aroundthe
world. WorkingwithNOTATOR, thepowerfulcompositionandproduction
programfrom G-Lab, newdimensionsinaudioarebeingexploredbysuch
artistsasTerry Riley, pion^rof "Minimalism,"Jean-MichelJarre,renowned
composer, andStarParodi, keyboardistforThePosse, ArsenioHall'sTVband.
Atarisystemsalsohelptocreatethesoundtracks, andsoundeffectsinmany
moviehitssuchas OliverStone's, "TheDoors," aTriStarPicturesrelease.
Financial Contents
Consolidated Balance Sheets 8
Consolidated Statements
-OF'Operations :t .,-:mm^^m:''^'-
Consolidated Statements
of ShAKEHOLDERS* EQUiTY / 10
Consolidated Statements
OF Cash Fiw 11
Notes to Consolidated
12
Financial Statements
Independent Auditors' Report 16
MANAGEMENT'S DISCUSSION
17
AND Analysis
Selected Financial Data 20
20
Directors and Officers
21
Corporate Offices
mm
0 R P"0 R A T 1.0 N
Consolidated Balance Sheets
December31, 1990 and1989
(amounts in thousands, exceptshareamounts) 1990 1989
A^0lS ' \ '
Current ASSETS:
Cash and equivalents (including $2,892 and $3,884 held as restricted
balances in 1990 and 1989 respectively—Note 5) $ 36,919 $ . 54,912
Trade receivables (less allowances for returns and doubtfulaccounts:
1990, $9,738; 1989, $10,579) 95,844 99,296
Inventories (Note 3) ^ 114,331 129,881
Prepaid expenses 5,817 4,726
Other current tax assets 1,352 10,322
Total current assets 254,263 299,137
PROPERT^~Net (Note 4) ji , . f'' -i ,:,:;V,'>.U!•:'.*!, i*I'''' ,,<\' 13,639 13,900
Other Assets 4,736 9,939
Total $ 272,638 $ 322,976
Current Liabilities: '
Notes payable (Note 5) $ 28,231 $ 35,433
Accounts payable * 74,252 84,072
Net cuirrent liabilities of discontinued operations (Not^, 2) 11,868
Income taxes payable 427 367
Accrued liabilities (Note 7) 19,452 27,835
Total current liabilities 122,362 159,575
LongTerm Obligations (Note 5) 49,016 77,402
Commitments (Note 6) and Contingent Liabilities (Note 11)
Shareholders' Equity (Note 9):
Preferred sfock, $.01 par value—authorized 10,000,000 shares; none outstanding
Common stock, $.01 par value—authorized, 100,000,000 shares; outstanding: ^
1990, 57,743,042 shares; 1989, 57,697,835 shares 577 577
Additional paid-in capital 143,529 143,226
Notes receivable from sale of common stock r (614) (827)
Accumulated deficit (41,054) (55,928)
Accumulated translation adjustments (1'178) (1,049)
Total shareholders' equity 101,260 85,999
\ TOT4L v„ , t $ 272,638 $ 322,976
See notes to consolidatedfinancialStatements.
Atari Corpora
t i o n