Arkle Res Regulatory News (ARK)

1 Aug 2007 07:01

Arc International PLC01 August 2007 Company Contact: Financial PR Contacts:Lee Garvin Flanagin Juliet Clarke / Matt DixonARC International Financial Dynamics+1 408 437 3433 +44 20 7831 3113lee.flanagin@arc.com juliet.clarke@fd.com ARC International plc Announces Unaudited Preliminary Results For the Six Months Ended June 30, 2007 18% Growth in Revenue; 82% Increase in Royalties; 2 Strategic Acquisitions Completed ST. ALBANS, England, August 1, 2007 - ARC International (LSE: ARK), the worldleader in configurable multimedia subsystems and CPU/DSP processor cores, todayannounced its unaudited financial results for the six months ended June 30,2007. Highlights • Continued Revenue Growth o Revenue up 18% to £7.0 million (1H 2006: £6.0 million) o Royalties up 82% to £2.8 million (1H 2006: £1.5 million) o Bookings up 61% to £13.4 million (1H 2006: £8.3 million) o Current backlog (including deferred revenue) up 14% to £4.1 million (1H 2006: £3.6 million) • Net Loss decreased 29% to £1.2 million, excluding incremental operating expenses of acquired companies (1H 2006: £1.7 million) o Net Loss decreased 9% to £1.5 million including incremental operating expenses of acquired companies • New First-Time Royalty Contributions; Increase in ARC-Based(TM)Unit Shipments o Post-2003 contracts contributing royalty revenues for the first time o Unit shipments reported by ARC customers up 65% • Completed 2 Strategic Acquisitions o Asset acquisition of Teja Technologies accelerates creation of software platforms and development environments for VRaptor(TM)Multicore Architecture o Acquisition of Tenison Technology EDA speeds time to market for customers' complex SoC designs • Landmark Agreements Deepen ARC's Partnerships with "Tier 1" Customers o $15 million multiyear license agreement with one of the largest consumer electronics companies o Broadcom standardized on ARC's configurable technology for multimedia applications Commenting on the company's performance, Carl Schlachte, president and chiefexecutive officer, said, "The industry's adoption of ARC's configurablesolutions continues to strengthen. ARC's growth again outpaced thesemiconductor market, and revenue increased at close to twice the rate comparedto ARC's performance in the first half of 2006. The company continued to signsignificant agreements with Tier 1 customers. Also in the first six months ARCcompleted two strategic acquisitions, which enhances the company's ability tosolve customers' chip design challenges by providing more of a complete,integrated solution with optimized hardware and software elements. Increasinglythis is one of ARC's competitive differentiators, and the acquisitions areexpected to strengthen ARC's revenue growth in the coming years." Commenting on the financial results, Victor Young, chief financial officer,said, "We are pleased to report higher-than-expected royalties for the firsthalf, which included for the first time revenue from recent contracts. Thismarks the beginning of planned royalty streams from customer engagements thatwere completed under the new management team. The integration of personnel andproducts from the two acquisitions already has been completed, and ARC hasintroduced a new modelling tool based upon Tenison's technology. Operatingexpenses excluding incremental operating expense of acquired companies werevirtually flat compared to 1H 2006. This was primarily due to a reduction in thegrowth of hiring as management assessed the need for new personnel in light ofthe Teja and Tenison acquisitions." Statement from the President and Chief Executive Officer Overview During the first half of 2007 ARC strengthened its market position by againposting strong revenue growth that outpaced the rate of growth of the worldwidesemiconductor industry. Of particular note were two strategic acquisitions andthe contribution of royalty revenue from customer contracts completed since theend of 2003. These generally include terms and conditions that are morefavorable to ARC, and therefore are expected to assist in growing the company'sroyalty revenue over the long term. ARC continued to complete multiyearlicensing agreements with industry leaders, including a $15 million contractwith one of the world's largest consumer electronics companies. Helpingdiversify ARC's market focus beyond the high-volume multimedia space, thecompany announced that its configurable solutions were selected for implantablemedical and security/government devices. Growing Adoption of ARC's Configurable Subsystems and CoresThe reputation of ARC's configurable products as the "solution of choice" forhigh-volume applications continues to improve. In the first six months of 2007ARC publicized twenty customer agreements with companies throughout NorthAmerica, Europe, and Asia. While not all of these contracts were completed inthe trading period, they indicate the ongoing adoption of ARC's configurableproducts for a growing diversity of end applications. Of note was thefirst-ever announcement of ARC customers using the company's configurable coresfor implantable medical devices, and new multiyear agreements with Tier 1companies. These twenty customer agreements were part of the larger trend ofincreasing adoption of ARC-Based solutions that helped push royalties andARC-Based units reported by customers in the first half of 2007 to 82 percentand 65 percent increases, respectively. ARC customer agreements announced inthe first six months of 2007: • Unnamed Large Consumer Electronics Company - signed a $15 million multiyear licensing agreement with ARC. The customer's identity is confidential, but is one of the largest consumer electronics companies in the world. • Broadcom - extended its existing ARC relationship with a new ten year licensing agreement. Broadcom has standardized on ARC's configurable technology for high-volume multimedia applications. • 11 Customers in North America - announced they have taken licenses for ARC's "best-in-class" low power configurable for a variety of applications including implantable medical devices, government and security products, multimedia solutions, and networking and peripheral applications. Medical Applications o CVRx for implantable blood pressure monitoring and treatment systems o Unnamed customer #1 for implantable pacemaker products o Unnamed customer #2 for unspecified implantable medical devices Government/Security Applications o Edgewater Computer Systems for military aircraft o Unnamed customer #3 for military and government applications Multimedia Applications o Augusta Technology for next-generation mobile solutions o Qpixel Technology for video compression engines o VisionFlow for ultra low power H.264 media devices Networking/Communications Applications o iVivity for multi-protocol acceleration engines o Teranetics for advanced communications applications o Unnamed customer #4 for peripheral devices with combined functionalities • 4 Customers in Asia - announced they have adopted ARC's configurable processors and subsystems to create SoCs for a range of end markets. These customers underscore ARC's increasing momentum throughout Asia. o AD Technology of Korea for power line communications (PLC) chips o Crystal Media of Taiwan for next-generation VoIP solutions o Fullhan Microelectronics of China for advanced multimedia products o Phison Electronics of Taiwan for next-generation flash NAND drives • 3 Customers in Europe - announced they are using ARC's configurable subsystems and cores for high-growth applications. o NemeriX for ultra low power GPS chipsets o Semtech for mixed-signal semiconductor products o SiConnect for PLC applications Strategic Acquisitions The complex nature of today's electronic devices presents a number of challengesto designers of system-on-chips (SoCs). They include the never-ending drive tomake silicon rapidly and at lower cost, as well as the need to reduce powerconsumption while processing multiple programs simultaneously. To solve this "design dilemma" and to efficiently handle tasks such as advancedaudio, high resolution video, and combined A/V functionality, semiconductorcompanies are implementing numerous processing elements on a single chip. Thesecan be comprised of multiple configurable ARC(R) cores either as connected,individual processors or as part of a multicore ARC subsystem. These chips alsocan include intellectual property (IP) from ARC and companies such as ARMHoldings. Providing customers solutions that fit into either design approach represents anexcellent opportunity for ARC International, and one driving the company'sstrategy. This strategy is helping grow ARC's revenue by expanding theserviceable available market (SAM) of customers that can adopt ARC'sconfigurable processors and/or subsystems for their chips. During the first half of 2007 ARC completed two acquisitions that support thisstrategy. Each brings to ARC key patents, technology, and personnel that areleading-edge in their respective areas of multicore SoC design. Theacquisitions were: • Teja TechnologiesARC acquired the key assets of Teja, a privately held company based in San Jose,California and a technology leader that developed multicore software. Theacquisition provides ARC with an acclaimed software development team that willhelp improve existing and create new application analysis, architecturalco-design, and multicore runtime tools for products based upon ARC's VRaptor(TM)Multicore Architecture. These will complement ARC's current software andprogramming solutions, such as the MQX(R) operating system and MetaWare(R)Development Toolkit. Teja was founded in 1998 with funding from venture firmssuch as the Mayfield Fund and Intel Capital. Their customer list included Tier1 companies such as Intel, Cisco Systems, Samsung, and Sun Microsystems. • Tenison Technology EDAARC acquired Tenison, a privately held company based in Cambridge that was aleading provider of software tools used to help create SoCs. The acquisitionincluded fifteen key members of Tenison's engineering team, patents, andproducts such as the VTOC(TM)software suite and IP eXchange technology. Theacquired Tenison products will provide highly accurate models of ARC'sconfigurable processors and subsystems. Moreover, they will allow ARC customersto simulate virtually all logic on any ARC-Based chip, including those usingnon-ARC technologies such as customer-developed IP and IP from other suppliers.ARC already introduced a new modelling product based upon Tenison technologycalled the ARC xCAM Modeller. Tenison's customer list included Tier 1 companiessuch as Broadcom, Freescale, and Renesas. These two acquisitions fit into ARC's business development roadmap that servesas a guide for consideration of strategic acquisitions. Areas of focus of theroadmap include development tools, services, software, and multimedia IP. Technology and Low Power Leadership Helping drive adoption of ARC's patented configurable subsystems and cores isthe increasing recognition of ARC's technology leadership within the worldwidesemiconductor industry. This is based in part on the pioneering work by ARCengineers in the field of configurable processors, and the company's developmentof the first multimedia subsystems using configurable cores. In recent years,ARC has won industry awards for its unique technology, including an award forits 128-bit SIMD accelerator that is a vital part of ARC multimedia subsystems.Developments in the first half of 2007 that enhanced ARC's technology leadershipincluded: • Establishment of an "Office of the CTO" (Chief Technology Officer)The group's charter is to advance research and development (R&D) and innovationof ARC's products in the areas of configurability, multicore architecture, andsoftware platforms. Members of the Office work with ARC's hardware and softwareengineering teams and directly with senior members at ARC's Tier 1 customers andprospect companies. Current members of ARC's Office of the CTO include o Dr. Akash Deshpande, the CTO and founder of Teja Technologies and a former professor at the University of California, Berkeley o Dr. David Greaves, faculty member and lecturer at the University of Cambridge Computer Laboratory, a founder of Virata, and the founder and chief scientist of Tenison o Dr. Tom Pennello, the CTO and co-founder MetaWare, ARC's technical director of software technology, and a former professor at the University of California, Santa Cruz o Dr. Nigel Topham, ARC's chief architect, and the chair of Computer Systems and director of the Institute for Computing Systems Architecture at the University of Edinburgh • ARC(R) Video Subsystem Wins "Best Technology Demonstration"Microprocessor Forum is a world renowned conference that serves as a showcasefor leading-edge technologies and products from companies throughout the globalsemiconductor industry. During a head-to-head competition at the 2007 event,the configurable ARC Video Subsystem was voted best-of-show by hundreds of Forumattendees who compared it against products from close to 20 other companies. • Enabling Low Power SoC DesignARC is extending its leadership in low power SoC design by building newreference methodologies that will enable customers to further reduce powerconsumption of the company's configurable subsystems and processors. The effortis being undertaken with the help of companies such as Cadence Design Systems,Magma Design Automation, and Virage Logic., and complements ongoing R&Dinitiatives between ARC and advanced computing departments at leadinguniversities. The new methodologies are some of the first to be createdleveraging industry standard formats, and will benefit customers developingchips for power sensitive applications. Development and Introduction of New "Best-in-Class" ARC Products ARC's customer base continues to grow and diversify. This is driving ARC toensure the company's existing and new solutions can solve an ever-changing setof SoC design challenges so that ARC's customers can meet their business goals.Accordingly, ARC is developing new best-in-class configurable subsystems andcores, enhancing technologies such as the recently introduced VRaptor MulticoreArchitecture, and co-developing solutions by working with third party companiesthroughout the semiconductor industry. • New ARC Video Subsystems to Offer High Quality EncodeEarly within the second half of 2007 ARC plans to introduce a new family ofvideo subsystems that will offer high quality video encode and decodecapabilities at very low power consumption. They will be the first to be basedupon the VRaptor Multicore Architecture, and will enhance ARC's multimediasubsystems. Each new video subsystem will contain numerous hardware andsoftware components that can effectively and efficiently process a wide range ofvideo codecs. Market applications for these new solutions will include cameraphones, camcorders, surveillance systems, and Internet-based cameras. • Configurable Processors Specially Optimized for Low Power ConsumptionToday ARC's configurable cores offer some of the lowest power consumption of anyin the semiconductor IP industry. This is a key reason behind their growing usein a diverse set of end markets. Within the second half of 2007 ARC is expectedto offer the first in a new family of configurable cores with a new "intelligentlow power technology." This is the result of ongoing investments in low powerinnovation, and will further extend ARC's leadership in power efficientsolutions. Expansion and Continued Success of the ConfigCon(TM)Developer Conference SeriesConfigCon is the industry's premier technical developer conference that educatesSoC designers globally on the advantages of ARC's configurable multimediasubsystems and processors. In 2006, more than 1,000 semiconductor engineers andexecutives attended ConfigCon events throughout Asia and in Silicon Valley. For 2007, the Series returns to Taiwan, China, Silicon Valley, and adds Israelto the roster. Within the first half of this year, three events have beencompleted with a 30 percent increase in registrations at the Taiwan and Chinavenues, and more than 200 attendees at the Israeli conference. Of note,Microsoft and RealNetworks (both ARC partners) delivered keynotes in Hsinchu,Taiwan about their perspectives on the future of multimedia SoC design. At eachconference ARC executives, engineers, and sales managers interface withattendees who were eager to learn how ARC's products help solve their SoC designchallenges. This bodes well for the ongoing development of sales leads for ARC. Strategic Organizational Changes Reflecting the rapid growth and evolution of ARC, the company announced a seriesof organizational changes that will increase the company's comprehensive focuson customer service, and high-quality technology and product development.Accordingly, Derek Meyer has been appointed as Chief Operating Officer.Formerly senior vice president of sales and marketing, Meyer's new role expandsto include worldwide engineering as well as ARC's technology initiatives.Executives reporting to Meyer include Paul Holt, who assumes the newly createdrole of vice president of product development and services. Furthermore, StevenGunders has been appointed to the Board as a Non Executive Director. Mr.Gunders is a qualified C.P.A. and holds an MBA from the University of Chicago.He is a former partner with Deloitte and Touche, and has more than 35 years offinancial consulting experience. Outlook The first half of 2007 was another strong financial period for ARCInternational. Revenue grew appreciably compared to the same period one yearago, again outpacing the overall semiconductor market. Royalties increased to arecord high with recent contracts contributing to royalty revenue for the firsttime. The completion of two strategic acquisitions strengthened ARC's industryposition, and is expected to assist in growing revenue over the long term. For the second half of 2007 ARC will extend its leadership in multimediasubsystems and low power configurable cores by offering new solutions. ARC alsowill continue to focus on its strategy of focused acquisitions that enhance thecompany's competitive differentiation. Management is confident in ARC's growingstrength and future growth potential. CHIEF FINANCIAL OFFICER'S REVIEW Six months ended 30 June 2007 Revenue Total revenue in 1H 2007 was £7.0 million, up 18% over the same period last year(1H 2006: £6.0 million). Prior to currency translation, with virtually allsales in US dollars, revenue was up 30%. License and engineering income was down7% at £3.2 million (1H 2006: £3.5 million). Maintenance and service income wasup 7% at £1.0 million (1H 2006: £1.0 million). Royalty income increased 82% to£2.8 million (1H 2006: £1.5 million). (Royalty income in 1H 2007 includesadvance non-refundable payments which represented 27% of the total royalties forthe period). Sales in Europe were 14% (1H 2006: 18%) of total sales, North America 71% (1H2006: 55%) and Asia 15% (1H 2006: 27%). Costs Cost of sales decreased 15% to £0.7 million (1H 2006: £0.9 million). Grossmargin increased to 90% (1H 2006: 85%). Net operating expenses increased by 5%to £8.7 million (1H 2006: £8.3 million). The company had 149 employees at 30 June 2007 compared with 123 at 30 June 2006.Research and development costs increased 4% to £3.4 million (1H 2006: £3.2million). Sales and marketing costs were virtually flat at £2.7 million (1H2006: £2.7 million). General and administration costs increased 15% to £1.8million (1H 2006: £1.6 million). Other expenses, comprised of depreciation,amortization and stock option expense, were virtually flat at £0.8 million (1H2006: £0.7 million). Interest Interest income was up 5% to £0.8 million (1H 2006: £0.7 million) due toincrease in the average interest rate on investments. Net loss Net loss was £1.5 million (1H 2006: £1.7 million). Loss per share decreased to1.05p (1H 2006: 1.17p). Cash flow and balance sheet The net cash outflow from operations was £2.9 million (1H 2006: £1.0 million).Capital expenditure was £1.2 million (1H 2006: £0.4 million). The movement incash and short-term investments during the six months was an outflow of £5.6million (1H 2006: outflow of £0.2 million). Total assets at 30 June 2007 were£35.4 million (1H 2006, £36.3 million), including cash and short-terminvestments of £26.0 million (1H 2006: £32.2 million). Dividend No interim dividend payment will be made for the six months ended 30 June 2007(1H 2006: £Nil). Acquisitions During the period ARC acquired the key assets of Teja Technologies for a totalcash consideration of £2,389,000 and Tenison Technology EDA Limited for a totalcash consideration of £1,067,000. See note 6 for details. Consolidated income statementFor the six months ended 30 June 2007 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Revenue 7,029 5,973 13,411Cost of sales (738) (870) (1,591)Gross profit 6,291 5,103 11,820Net operating expenses 2 (8,684) (8,271) (16,045)Operating loss (2,393) (3,168) (4,225)Interest receivable 751 717 1,509Loss before tax (1,642) (2,451) (2,716)Tax credit 99 763 1,583Loss for the period 4 (1,543) (1,688) (1,133) Basic and diluted loss per share - pence (1.05) (1.17) (0.78) Consolidated statement of recognised income and expenseFor the six months ended 30 June 2007 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000Loss for the period (1,543) (1,688) (1,133)Currency translation difference 4 (54) (56) (267)Change in value of ESOP reserve 4 76 27 40Total recognised expense for the period (1,521) (1,717) (1,360) The notes on pages 10-14 form part of the interim financial information Consolidated balance sheetAs at 30 June 2007 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000Non-current assetsIntangible assets 2,999 992 843Goodwill 886 - -Property, plant and equipment 1,297 394 424Trade and other receivables 372 - 372 5,554 1,386 1,639Current assetsInventory 200 110 203Trade and other receivables 3,478 2,573 2,959Current corporation tax receivable 100 - 700Short term investments 19,484 19,539 13,500Cash and cash equivalents 6,555 12,665 18,146 29,817 34,887 35,508Total assets 35,371 36,273 37,147Current liabilitiesTrade and other payables 2,989 4,438 4,762Other liabilities 1,112 151 -Provisions 5 216 77 306 4,317 4,666 5,068Net current assets 25,500 30,221 30,440Non-current liabilitiesDeferred tax liabilities 138 - -Other payables - 35 -Provisions 5 - 170 38 138 205 38Net assets 30,916 31,402 32,041Shareholders' equityOrdinary shares 152 150 151Share premium 3,538 3,081 3,256Capital redemption reserve 162 162 162Merger reserve 107 107 107Other reserves 60,595 60,369 60,482Cumulative translation adjustment (511) (239) (457)Retained earnings (33,127) (32,228) (31,660)Total Equity 4 30,916 31,402 32,041 The notes on pages 10-14 form part of the interim financial information. Consolidated cash flow statementFor the six months ended 30 June 2007 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000Cash flows from operating activitiesCash used in operations 3 (2,872) (1,024) (1,678)Interest received 856 851 1,474Tax paid (1) (59) (97)Tax refund 701 755 755Net cash generated (used) in operating (1,316) 523 454activities Cash flows from investing activitiesPurchase of property, plant and equipment (901) (162) (353)Purchase of intangible assets (309) (264) (552)Capitalisation of R&D assets - (21) (21)Movements on short term investments (5,984) (9,005) (2,966)Acquisition of Tenison Technology EDA Limited net of cash acquired 6 (997) - -Acquisition of Teja assets 6 (2,389) - -Net cash (used) in investing activities (10,580) (9,452) (3,892) Cash flows from financing activitiesNet proceeds from issue of ordinaryshares and 359 186 375 ESOP reserveNet cash generated in financing 359 186 375activities Effects of exchange rate changes (54) (68) (267)Net (decrease) in cash and cash (11,591) (8,811) (3,330)equivalentsCash and cash equivalents at 1 January 18,146 21,476 21,476Cash and cash equivalents at end of 6,555 12,665 18,146period The notes on pages 10-14 form part of theinterim financial information. Notes 1. Basis of preparation These consolidated interim financial statements have been prepared in accordancewith the accounting policies set out in the Annual Report of ARC Internationalplc for the year ended 31 December 2006. The prior year comparatives are derivedfrom audited financial information for ARC International plc as set out in theAnnual Report for the year ended 31 December 2006 and the unaudited financialinformation in the consolidated interim financial statements for the six monthsended 30 June 2006. These consolidated interim financial statements have beenprepared under the historical cost convention, except in respect to certainfinancial instruments. In addition, these consolidated interim financialstatements do not comply with all the disclosures in IAS 34 on interim financialreporting and are therefore not in full compliance with International FinancialReporting Standards as adopted by the EU ("IFRSs"). The consolidated accounts incorporate the accounts of the Company and of each ofits subsidiaries for the period to 30 June 2007. All new acquisitions areaccounted for under the purchase method from the date of acquisition. The preparation of financial statements in conformity with IFRSs requires theuse of certain critical accounting estimates. It also requires management toexercise its judgment in the process of applying the Group's accountingpolicies. Although these estimates are based on management's best knowledge ofthe amount, event or actions, actual results ultimately may differ from thoseestimates. The consolidated interim financial statements for the six months ended 30 June2007 are unaudited but have been reviewed by the auditors. The consolidatedinterim financial statements for the six months ended 30 June 2007 were approvedby the directors on 31 July 2007. The financial information contained in this interim statement does notconstitute statutory accounts as defined by section 240 of the Companies Act1985. The statutory accounts for 2006, have been delivered to the Registrar ofCompanies. The auditor's report on the full financial statements for the yearended 31 December 2006 was unqualified and did not contain statements undersection 237 (2) of the Companies Act 1985 (regarding the adequacy of accountingrecords and returns), or under 237 (3) (regarding provision of necessaryinformation and explanations). 2. Summary of net operating expenses 6 months ended 6 months ended 12 months ended 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Research and development (3,380) (3,240) (6,716)Sales and marketing (2,717) (2,684) (5,023)General and administrative (1,832) (1,599) (3,254)Other expenses (755) (748) (1,052)Net operating expenses (8,684) (8,271) (16,045) 3. Reconciliation of net loss for the period to net cash outflow from operatingactivities 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net loss (1,543) (1,688) (1,133)Adjustments for:Interest receivable (751) (717) (1,509)Tax expense/(credit) (99) (763) (1,583)Loss on disposal of property, plant and equipment 17 - -Amortisation 492 471 823Depreciation 150 107 229Goodwill impairment - - -Loss on disposal of property, plant and equipment - - 5Release of backlog (from Teja) - - -Share based award expense 113 171 277(Increase)/decrease in inventories 3 (110) (203)(Increase)/decrease in trade and other receivables (261) 974 393Increase/(Decrease) in trade and other payables (865) 570 965Increase/(Decrease) in provisions (128) (39) 58Cash used in operations (2,872) (1,024) (1,678) 4. Statement of changes in shareholders' equity Capital Cumulative Retained Share Share Merger redemption Other translation profit/ capital premium reserve reserve reserves adjustment (loss) Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 January 2006 149 2,923 107 162 60,205 (190) (30,567) 32,789 Shares issued 1 158 159Change in value of ESOP reserve 27 27Share based award reserve 171 171Exchange gain (56) (56)(Loss) for the period (1,688) (1,688)At 30 June 2006 150 3,081 107 162 60,376 (246) (32,228) 31,402 Shares issued 1 175 176Change in value of ESOP reserve 13 13Share based award reserve 106 106Exchange gain (211) (211)Gain for the period 555 555 At 31 December 2006 151 3,256 107 162 60,482 (457) (31,660) 32,041Shares issued 1 282 283Change in value of ESOP reserve 76 76Share based award reserve 113 113Exchange (loss) (54) (54)(Loss) for the period (1,543) (1,543) At 30 June 2007 152 3,538 107 162 60,595 (511) (33,127) 30,916 5. Provisions Current Non-current Total provision £'000s £'000s £'000s At 1 January 2006 77 209 286Utilised (39) - (39)Reclassified from long term to short term 39 (39) -At 30 June 2006 77 170 247 Utilised (38) - (38)Reclassified from long term to short term 170 (170) -Charges to the income statement 97 38 135At 31 December 2006 306 38 344 Utilised (83) - (83)Release of provision due to termination of lease (45) - (45)Reclassified from long term to short term 38 (38) -At 30 June 2007 216 - 216 The utilisation of the provisions relates to onerous lease commitments inElstree, UK and Santa Cruz, USA (2006 Elstree alone). In 1H 2007, the Companyreached an agreement with the Santa Cruz landlord to terminate the lease. Inexchange for paying the remaining lease payments in advance, £45,000 of thelease obligation was waived by the landlord. The balance of the provision£216,000 represents an onerous lease commitment and the associated restorationcosts for the Elstree, UK facility. Management anticipates full utilisation ofthe Elstree provision in the second half of 2007, as the lease terminates inJuly 2007. 6. Acquisitions The group purchased Tenison Technology EDA Limited on June 15, 2007 for a totalconsideration of £1,067,000, and certain assets of Teja Technologies Inc on 2April 2007 for £2,389,000. Tenison Technology EDA In the Tenison purchase, 100% of the voting shares were acquired. All intangible assets were recognized at their respective fair values. Theresidual excess over the net assets acquired is recognized as goodwill in thefinancial statements. The fair values are subject to adjustments in respect ofachieving specified net asset amounts, which affect intangible assets fordeveloped core technology, net tangible assets, deferred tax, and goodwill. The fair value adjustments contain some provisional amounts that will befinalized in the 2007 annual accounts. Goodwill of £874,000 represents the valueof synergies and assembled work force. Teja Technologies In the Teja purchase, only key assets were acquired. The acquisition includesTeja's software products, key customer contracts, its engineering team, andpatents for Teja's award-winning technology. The fair value of the Teja acquisition is predominantly for intangible developedcore technology, and to a lesser extent, customer backlog, trade receivables,and deferred revenue. The fair value adjustments contain some provisional amounts that will befinalized in the 2007 annual accounts. Goodwill of £12,000 represents the valueof synergies and assembled work force. About ARC International plcARC International is the world leader in configurable media subsystems and CPU/DSP processors. Used by over 140 companies worldwide, ARC's configurablesolutions enable the creation of highly differentiated SoCs that ship inhundreds of millions of devices annually. ARC's patented subsystems and coresare smaller, consume less power, and are less expensive to manufacture thancompeting products. ARC International maintains a worldwide presence with corporate and research anddevelopment offices in Silicon Valley and St. Albans, UK. For more informationvisit www.ARC.com. ARC International is listed on the London Stock Exchange asARC International plc (LSE: ARK). ARC, ARC-Based, the ARC logo, ARChitect, MetaWare, MQX, VRaptor, ConfigCon, andVTOC are trademarks or registered trademarks of ARC International. All otherbrands or product names contained herein are the property of their respectiveowners. This release may contain "forward-looking statements" includingstatements concerning plans, future events or performance and underlyingassumptions and other statements that are other than statements of historicalfact. ARC's actual results for future periods may differ materially from thoseexpressed in any forward-looking statements made by or on behalf of ARC. Thefactors that could cause actual results to differ materially include, withoutlimitation, general economic and business conditions; potential for fluctuationsin and unpredictability of ARC's quarterly results; assumptions regarding ARC'sfuture business strategy; the ability of semiconductor partners to manufactureand market microprocessors based on the ARC(R) architecture; the acceptance ofARC technology by systems companies; the availability of development tools,systems software and operating systems; the rapid change in technology in thesemiconductor industry and ARC's ability to develop new products in a timelymanner; competition from other architectures; ARC's ability to protect itsintellectual property; regulatory policies adopted by governmental authorities;risks associated with ARC's international operations; management of ARC'sgrowth; ARC's ability to attract and retain employees; and other uncertaintiesthat are discussed in the "Investment Considerations" section of ARC's listingparticulars dated 28 September 2000 filed with the United Kingdom ListingAuthority and the Registrar of Companies in England and Wales. This information is provided by RNS The company news service from the London Stock Exchange