Interim Results

Interim Results LONDON--(BUSINESS WIRE)--July 30, 2003-- ARC INTERNATIONAL PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003 ARC International plc (LSE: ARK), a world leader in configurable System-On-Chip (SoC) platform technologies, today announces unaudited financial results for the second quarter and the six months ended 30 June 2003. Financial and Operational Highlights Second Quarter ended 30 June 2003: - Turnover of £2.4 million, down 17% sequentially (Q1 2003: £2.9 million) - Operating expenses before exceptional, amortisation and depreciation reduced by 4% to £6.8 million (Q1 2003: £7.1 million) - Pre-exceptional net loss of £5.6 million (Q1 2003: £4.4 million) - Cash burn (excluding the share buyback) reduced by 23% to £3.4 million - Increase in royalty income from £0.2 million to £0.4 million, a sequential increase of 130% - 10 new design licenses won, 8 for USB Now? and 2 for the ARCtangent? processor - Software and development tools shipped to more than 50 customers - Launched ARC CertiPHY Programme to address need for interoperability between USB Solutions - Completed share buyback Six months ended 30 June 2003: - Turnover at £5.3 million up 3% at constant exchange rates, down 8% over the same period in the prior year after currency impact (2002: £5.7 million) - Operating expenses before exceptional, amortisation and depreciation reduced by 6% to £14.0 million (2002: £14.8 million) - Pre-exceptional net loss of £10.0 million (2002: £10.4 million) - Cash burn (excluding the buyback) reduced by 13% to £7.8 million - Strong cash position of £44.9 million following completion of the share buyback - 24 design licences and additional customers won in the first half 2003, 15 for USB peripheral products and 9 for the ARCtangent? processor - Launched several new products including: OS Changer, VoIP codec, Embedded Software for Motorola(R) ColdFire(TM) MCF5282 Processor and USB Class and Device Drivers. Commenting on the results, Mike Gulett, Chief Executive Officer, said: "Customers continued to be cautious in their decisions to license IP and we experienced a number of license deferrals this past quarter. In spite of not closing as many licensing deals as in previous quarters, we are encouraged that these deals have not been lost to competitors." "As a result of the configurability of the ARCtangent, an increasing number of customers are now integrating multiple ARCtangent cores into their designs. Most recent examples include iStor Networks and Xiran." "Our pipeline for new products is stronger than ever. In the third quarter, we are on track to introduce a significant number of products across the processor, peripheral and software business units. We also had our highest quarter for royalty payments which accounted for 16% of the revenue base and we expect royalty income growth to continue." "We will continue to focus on optimising our cost structure and reducing quarterly cash burn. In the last six months, we have completed the share buy back as planned and maintain a strong balance sheet." For further information, please contact: ARC International plc Mike Gulett CEO, +44 (0) 20 8236 2800 Monica Johnson CFO, +44 (0) 20 8236 2800 Tulchan Communications Julie Foster Consultant, +44 (0) 20 7353 4200 ARC will host an analyst briefing today at 9:30am. The slides in the briefing presentation may be accessed on the presentations page of the Investor Relations section of ARC's website: www.ARC.com . An audio replay of the briefing will also be available on ARC's website. Chief Executive's Review Overview In the first half of 2003, ARC reported a 3% increase in turnover at constant exchange rates to £5.3 million, down 8% with currency impact from £5.7 million over the same period last year. Operating expenses before exceptionals, amortisation and depreciation were reduced by 6% to £14 million. Many of our current and prospective customers continue to delay new product development and a high number of license deals were deferred. However, we booked 10 new design licenses including 2 customers for the ARCtangent processor and 8 licenses for USB in the second quarter, bringing the total for the first half of the year to 24 new peripheral and processor customers. We also continue to license more than 50 new software customers per quarter. As a result of the prolonged SARs epidemic, we did not reach our projected growth in Asia, but the region contributed a 10% increase in our overall turnover stream, up to 10% of turnover from the 8% reported in Q1 2003. Share Buyback ARC completed its share buyback in May 2003. The Company purchased 162,413,705 shares at a strike price of 29 pence, amounting to a total consideration of £48.3 million (including expenses). Following the buyback, the company is left in a strong position with £44.9 million in cash remaining. Product Strategy and Customer Focus The Company continues to build on its strategy of offering more elements to build a total system solution. Applications such as digital still cameras (DSC) and storage networking, utilize products from across all of ARC's business units. Success of this approach is increasingly evidenced by the reported turnover split. In the first half of the year, 35% of turnover came from processors, 30% from toolsets and software and 35% from peripherals. Providing more vertically integrated solutions makes it easier for our customers to minimize development costs and risk while designing complex products. We believe that this approach will benefit the company over the long term. Consumer Electronics A growing number of companies are evaluating ARC's technology for consumer electronics. Recently announced companies, which are now using ARC's products include: Altek Labs, Inc., a Taiwanese-based company, manufactures digital cameras for Konica, HP and Kodak. It licensed the ARCtangent processor and ARC's MetaWare software development tool suite to aid the development of next generation products. Pictos/ESS Technology used ARCtangent technology and elements of the MetaWare software development tool suite in both the Raptor 2 and 3 processors for digital cameras. Raptor 3, their latest product, was just qualified by TSMC fabrication facility and is expected to go into production soon. SMal Camera Technologies selected both the processor and USB IP for use in the world's thinnest digital camera. Fujitsu Microelectronics introduced its new highly integrated IP-phone VoIP chip for internet telephony applications in April. This product is based on a user-customized ARCtangent processor. Multiple-processor designs More than two dozen companies have integrated multiple ARCtangent cores into a variety of multiprocessor applications over the years. Most recently: iStor Networks developed a complete new line of network processors based on the ARCtangent and its associated software development tools. It selected ARC's technology because it filled iStor's need for power, scalability and architectural agnosticism. Xiran credits the ARCtangent as a key reason their new network processing engine won a best-in-breed award at this year's National Association of Broadcasters Conference. It integrated eight ARCtangent processors into this award-winning product. USB and ARCtangent Processors In April, ARC introduced the VoIP software codec for the ARCtangent. The voice coding library is the first in a new family of software codecs that increases the number of building blocks ARC provides for its customers. Several new multimedia codecs will be introduced later this year. ARC also introduced the first six USB On-the-Go (USB-OTG) class and device drivers. These new products complement the Company's existing USB software to provide the industry's first complete software package for primary USB OTG applications. Until now, class drivers for USB OTG were not readily available to system designers, so offering complete driver solutions is extremely attractive to developers looking for a time-to-market advantage. Additional drivers will be announced this year. Software and Development tools In February, the ARC-OS Changer was introduced. This software product reduces the time it takes an engineering team to transfer their software from one development environment to another. In April, the Company announced software support for the popular ColdFire(TM) processor from Motorola(R). These offerings, and others to be announced, are aimed at easing the development of complex products based on non-ARC processors. Strategic Alliances ARC has expanded and successfully signed new strategic partnerships with industry leaders to assist engineers with the development of complex embedded systems. In the first half of the year, ChipIdea, Genesys Logic America, IBM, Innovative, LSI Logic, Metrowerks, Royal Philips Electronics, SMSC and TSMC either expanded their relationships or entered into new relationships with us, opening new customer channels. - ChipIdea, Genesys, Innovative, Philips and SMSC joined ARC's industry-leading USB team to introduce the ARC CertiPHY(TM) Programme, which aids SoC developers with interoperability testing and eases industry certification of their products. - IBM Blue Logic IP Collaboration Programme IBM upgraded ARC to gold status in the IBM Blue Logic IP Collaboration Programme with successful production of ARC-based product. - LSI Logic added ARC's high-speed USB OTG to its CoreWare. library of Intellectual Property. LSI makes this library available to internal and external customers for new product development. - Metrowerks Our relationship with Metrowerks, an independent operating subsidiary of Motorola Inc., continues to expand. Over the next two quarters, ARC will introduce software development boards for four major new processors. - TSMC Five Star IP Alliance Programme ARC is a Five Star IP Alliance member for the ARCtangent processor and the USB product line. In order to be admitted into TSMC's Five Star IP Alliance Programme, at least one customer must have its ARC-based product go through the complete production process at one of TSMC's fabrication facilities. To date, twenty-three of ARC's customers have had their prototypes produced by TSMC. Six of those customers are in production. Outlook Our pipeline for new products is stronger than ever. In the third quarter, we are on track to introduce a significant number of products across the processor, peripheral and software business units. We will continue to focus on optimising our cost structure and reducing cash burn. In the last six months, we have completed a share buy back and maintain a strong balance sheet. We now believe that ARC is in a much stronger position to benefit from any pick-up in customer spending. Financial Review Second Quarter ended 30th June 2003 Turnover Total turnover for the second quarter was £2.4 million, down 17% from the first quarter turnover of £2.9 million and 20% year over year (Q2 2002: £3.0 million). Prior to currency translation, with virtually all sales in US$, underlying turnover was down 15% sequentially and 11% over Q2 2002. License income was 33% lower than the previous quarter at £1.5 million (Q1 2003: £2.2 million). Maintenance and service income was similar to that in the previous quarter at £0.5 million (Q1 2003: £0.5 million). The number of designs being shipped by our customers and contributing to royalties increased significantly resulting in a 130% increase in royalties to £0.4 million (Q1 2003: £0.2 million). Costs Cost of sales of £0.4 million increased 2% sequentially and 16% year over year (Q1 2003: £0.4 million, Q2 2002: £0.3 million) which, combined with the turnover decrease, resulted in a gross margin of 84% (Q1 2003: 87%). Total operating expenses (excluding exceptional costs, amortisation of goodwill and depreciation) decreased by 4% sequentially and 7% year over year to £6.8 million (Q1 2003: £7.1 million, Q2 2002: £7.4 million). The Company had 205 employees at 30 June 2003 compared with 209 at 31 March 2003. Research and development costs were down 9% sequentially and unchanged year over year at £3.1 million (Q1 2003: £3.4 million, Q2 2002: £3.1 million). Sales and marketing costs decreased 9% sequentially and 13% year over year to £2.2 million (Q1 2003: £2.4 million, Q2 2002: £2.6 million). General and administration costs at £1.1 million were up 23% sequentially and down 17% year over year (Q1 2003: £0.9 million, Q2 2002: £1.4 million) due to foreign exchange losses and one-time expenses. Interest Interest income decreased 25% sequentially and 36% year over year to £0.7 million (Q1 2003: £1.0 million, Q2 2002: £1.1 million) due to lower cash balances. Net Loss The net loss prior to exceptional items was £5.6 million representing a sequential increase of 9% (not including the Q1 2003 tax credit) and a 12% increase year over year (Q1 2003: £5.2 million, Q2 2002: £5.0 million). Loss per share prior to exceptional items increased to (2.3) p (Q1 2003: (1.5) p, Q2 2002: (1.7) p) as a result of the significant reduction in share count following the share buyback. During the share buy back, the Company purchased 162,413,705 shares resulting in 143,980,214 shares outstanding as of 30 June 2003. Net loss including exceptional items was £5.9 million (Q1 2003: £3.8 million, Q2 2002: £4.9 million). The £0.2 million exceptional item relates to reductions in the workforce announced in April 2003. Cash flow and balance sheet The net cash outflow from operations was £4.1 million (Q1 2003: £5.4 million, Q2 2002: £4.8 million). Capital expenditure was £0.6 million and the outflow related to the share buyback was £48.3 million. The movement in net funds during the quarter was an outflow of £49.5 million. Net assets at 30 June 2003 were £57.1 million, including net cash of £44.9 million. Six months ended 30 June 2003 Turnover Total turnover at £5.3 million was up 3% at constant exchange rates and down 8% from the previous year with currency impact (2002: £5.7 million). License income was £3.8 million (2002: £4.4 million). Maintenance and service income was £1.0 million (2002: £1.1 million) and royalties were £0.5 million (2002: £0.2 million). Costs Cost of sales was £0.8 million (2002: £0.7 million), resulting in a gross margin of 85% (2002: 87%). Total operating expenses (excluding exceptional costs, amortisation of goodwill and depreciation) decreased 6% to £14.0 million (2002: £14.8 million). Total headcount in the business at 30 June 2003 was 205 employees compared with 212 at 30 June 2002. Research and development costs were up 6% to £6.5 million (2002: £6.1 million), sales and marketing costs were down 12% to £4.7 million (2002: £5.3 million) and general and administration costs were down 23% to £2.1 million (2002: £2.7 million). Interest Interest income was £1.7 million (2002: £2.2 million). Net loss The net loss before exceptional costs was £10.0 million (2002: £10.4 million). Cash flow and balance sheet The net cash outflow from operations was £9.5 million (2002: £10.8 million). Capital expenditure was £1.4 million (2002: £1.5 million). The movement in net funds during the half-year was a £55.2 million outflow, £48.3 million was related to the share buy back. On 2 April 2003 the court approved the reduction in share capital resulting in the cancellation of the share premium account, write-off of the accumulated deficit on the profit and loss account, creation of a distributable reserve of £73.5 million and the balance credited to a special reserve. Net assets at 30 June 2003 were £57.1 million (30 June 2002: £126.6 million), including net cash of £44.9 million. Dividend No interim dividend payment will be made in respect of the six months ended 30 June 2003. ARC International plc Consolidated profit and loss account for the six months ended 30 June 2003 ---------------------- 3 months 3 months 6 months 6 months ended ended ended ended 30 June 30 June 30 June 30 June 2003 2002 2003 2002 (unaudited)(unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 Turnover 2,394 3,011 5,285 5,742 Operating costs ---------------------------------------------------------------- ----------- ----------- Goodwill amortisation (968) (1,024) (1,936) (2,046) Exceptional costs (240) 139 296 139 Other operating costs (7,796) (8,141) (15,854) (16,356) ---------------------------------------------------------------- ----------- ----------- (9,004) (9,026) (17,494) (18,263) Loss before interest and tax (6,610) (6,015) (12,209) (12,521) Interest receivable and similar income 722 1,117 1,686 2,242 Interest payable and similar charges (2) - (3) - ---------------------- ----------- ----------- Loss on ordinary activities before tax (5,890) (4,898) (10,526) (10,279) Tax on loss on ordinary activities 1 - 822 (2) ---------------------- ----------- ----------- Retained loss for the period (5,889) (4,898) (9,704) (10,281) ====================== =========== =========== Basic loss per share (2.45)p (1.67)p (3.63)p (3.51)p Diluted loss per share (2.45)p (1.67)p (3.63)p (3.51)p Pre-exceptional loss per share (2.35)p (1.72)p (3.74)p (3.56)p ---------------------- Summary of operating expenses Operating costs Cost of sales (393) (338) (780) (735) Research and development (3,093) (3,104) (6,493) (6,147) Sales and marketing (2,228) (2,572) (4,664) (5,306) General and administration (1,131) (1,360) (2,053) (2,659) Depreciation of fixed assets (951) (767) (1,864) (1,509) Amortisation of goodwill (968) (1,024) (1,936) (2,046) Exceptional costs - Provision release - 139 536 139 Exceptional costs - restructuring (240) - (240) - ------- ------- -------- -------- Total operating expenses (9,004) (9,026) (17,494) (18,263) ------- ------- -------- -------- ARC International plc Consolidated statement of total recognised gains and losses for the six months ended 30 June 2003 ----------- ----------- 3 months 3 months 6 months 6 months ended ended ended ended 30 June 30 June 30 June 30 June 2003 2002 2003 2002 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 Loss for the period (5,889) (4,898) (9,704) (10,281) Currency translation difference (87) (640) 45 (178) Adjustment to other reserves - - - - ----------- ----------- ----------- ----------- Total loss for the period (5,976) (5,538) (9,659) (10,459) ----------- ----------- =========== =========== ARC International plc Consolidated balance sheet as at 30 June 2003 30 June 30 June 31 December 2003 2002 2002 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Fixed assets Intangible assets 5,830 10,312 7,765 Tangible assets 5,914 6,600 6,419 Investments 1,660 - 1,660 ----------- ----------- --------- 13,404 16,912 15,844 ----------- ----------- --------- Current assets Stock 86 156 88 Debtors 3,841 4,067 4,981 Investments - bank deposits 42,900 109,979 98,064 Cash at bank and in hand 1,983 1,744 2,921 ----------- ----------- --------- 48,810 115,946 106,054 Creditors - amounts fully due within one year (3,947) (4,304) (4,578) ----------- ----------- --------- Net current assets 44,863 111,642 101,476 Total assets less current liabilities 58,267 128,554 117,320 Creditors - amounts fully due after more than one year - (3) - Provisions for liabilities and charges (1,144) (1,949) (2,566) ----------- ----------- --------- Net assets 57,123 126,602 114,754 Capital and reserves Called up share capital 144 293 300 Share premium account 1,355 152,248 152,661 Exchangeable shares 751 4,040 4,040 Capital Redemption Reserve 162 - - Merger reserve 107 107 107 Other reserves 60,524 24,719 23,065 Profit and loss account (5,920) (54,805) (65,419) ----------- ----------- --------- Total shareholders' funds 57,123 126,602 114,754 ARC International plc Consolidated cash flow statement for the six months ended 30 June 2003 ----------- ----------- 3 months 3 months 6 months 6 months ended ended ended ended 30 June 30 June 30 June 30 June 2003 2002 2003 2002 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 Net cash outflow from operating activities (4,068) (4,829) (9,510) (10,792) Returns on investments and servicing of finance Taxes paid (5) - (44) - Tax refund - - 871 - Interest received 988 927 1,892 2,244 Bank interest paid - - (1) - ----------- ----------- ----------- ----------- 983 927 2,718 2,244 ----------- ----------- ----------- ----------- Capital expenditure and financial investment Purchase of tangible fixed assets (628) (183) (1,529) (1,505) Disposal of intangible fixed assets - - - - Disposal of tangible fixed assets 2 - 170 - Share Buyback (48,280) (48,280) Investment in own shares - - - - ----------- ----------- ----------- ----------- (48,906) (183) (49,639) (1,505) ----------- ----------- ----------- ----------- Net cash outflow before management of liquid resources and financing (51,991) (4,085) (56,431) (10,053) ----------- ----------- ----------- ----------- Management of liquid resources Movement on term deposits 49,505 3,561 55,164 9,422 ----------- ----------- ----------- ----------- Financing Financing - issue of ordinary share capital to satisfy share option exercises 303 429 308 1,021 Capital element of finance lease rentals - (3) (1) (4) ----------- ----------- ----------- ----------- Net cash inflow from financing 303 426 307 1,017 ----------- ----------- ----------- ----------- (Decrease)/Increase in cash during the period (2,183) (98) (960) 386 ----------- ----------- ----------- ----------- 1. Basis of preparation The interim financial statements comprise the unaudited consolidated accounts of ARC International plc group at 30 June 2003 and for the six months then ended. The interim financial statements of ARC International plc have been prepared on the basis of the accounting policies set out in the Annual Report of ARC International plc for the year ended 31 December 2002. The prior year comparatives are derived from the audited financial information for ARC International plc as set out in the Annual Report for the year ended 31 December 2002. The interim financial statements for the six months ended 30 June 2003 are unaudited but have been reviewed by the auditors. The report of the auditors is set out on page 13. The interim financial statements for the six months ended 30 June 2003 were approved by the directors on 29 July 2003. 2. Movement on reserves and share capital Share Capital Share premium Exchangeable Merger Redemption Other Profit capital account Shares reserves Reserve reserves and Total loss account Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ---------------------------------- ------- --------- ------------ -------------------------- -------- -------- -------- At 1 January 2003 300 152,661 4,040 107 23,065 (65,419) 114,754 Exchangeable Shares exercised 4 3,285 (3,289) 0 Shares Issued 2 306 308 Reduction of Share Premium Account (154,897) 85,739 69,158 0 Share Buyback (162) 162 (48,280) (48,280) Exchange Loss 45 45 Retained loss for 6 months ended 30 June 2003 (9,704) (9,704) ---------------------------------- ------- --------- ------------ -------------------------- -------- -------- -------- At 30 June 2003 144 1,355 751 107 162 60,524 (5,920) 57,123 ---------------------------------- ------- --------- ------------ -------------------------- -------- -------- -------- Other reserves include £59,120,000 for the cancellation of share premium in 2003 arising from the capital reduction set out in the court order approved on 2 April 2003, giving rise to a distributable reserve of £25,220,000 with the balance of £33,900,000 remaining non-distributable (2002: £21,661,000). In addition other reserves include the fair value of options issued of £1,276,000 (2002: £1,276,000) as consideration for the acquisition of ARC International Nashua, Inc. (formerly V Automation Inc.); and £128,000 (2002: £128,000) in relation to share option grant credits under UITF 17. 3. Reconciliation of operating profit to net cash flow from operating activities 3 months 3 months 6 months 6 months ended ended ended ended 30 June 30 June 30 June 30 June 2003 2002 2003 2002 (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 Operating loss (6,610) (6,015) (12,209) (12,521) Depreciation 951 767 1,864 1,509 Amortisation of goodwill 968 1,024 1,936 2,046 Loss on disposal of fixed assets - - - 44 Share option grant credit - 28 - 17 Decrease/(increase) in stocks 3 (1) 2 (3) Decrease/(increase) in debtors 1,233 (263) 949 (661) (Decrease) in creditors (539) (80) (630) (739) (Decrease)/increase in provisions (74) (289) (1,422) (484) ----------- ----------- ----------- ----------- Net cash flow from operating activities (4,068) (4,829) (9,510) (10,792) ----------- ----------- ----------- ----------- 4 Copies of this report are being sent to shareholders and are available to the public at the Company's Registered Office: ARC House, Waterfront Business Park, Elstree Road, Elstree, Hertfordshire WD6 3BS. The financial information contained in this announcement does not constitute statutory accounts within the meaning of Section 240 (3) of the Comapnies Act 1985. Statutory accounts of the Company in respect of the financial year ended 31 December 2002 have been delivered to the Registrar of Companies, upon which the Company's auditors have given a report which was unqualified and did not contain a statement under Section 237 (3) of that Act. Independent review report to ARC International plc Introduction We have been instructed by the company to review the financial information which comprises consolidated profit and loss, consolidated statement of total recognised gains and losses, consolidated balance sheet, consolidated cash flow statement and the notes supporting these primary statements set out on pages 7 to 12. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of The Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2003. PricewaterhouseCoopers LLP Chartered Accountants West London 30 July 2003 Notes: (a) The maintenance and integrity of the ARC International Plc's website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. Notes About ARC ARC International pioneered the integrated development environment for SoC design in an effort to minimize design risk for customers developing next generation wireless, networking and consumer electronics products. ARC introduced the industry's first user-customizable 32-bit RISC/DSP processor core. In early 2000, ARC became the first company to integrate the development tools, peripherals, RTOS and software that enable the designer to better design optimization and performance. ARC's approach to providing a single source for the major SoC building blocks reduces the number of IP suppliers, reduces cost, reduces the risk of system-on-chip design and reduces time-to-market. ARC's products include: - The ARCtangent(TM) user-customizable 32-bit RISC/DSP processor; - USB 2.0 On-the-Go (OTG) High-Speed Host and Device; small Ethernet 10/100 MAC, and other peripherals; - MetaWare. C/C++ Compiler, the most popular integrated software development tool suite for SoC design; - SeeCode(TM ), the leading tool for simultaneous, multi-processor debugging; - Precise/RTCS(TM), embedded Internet stack and related software protocols; - Precise/MQX(TM), a scalable real-time operating system (RTOS). - ARC's software tools, RTOS and embedded software are also available for ARM, PowerPC and MIP's processors. ARC International employs approximately 205 people in research and development, sales and marketing offices across North America, Europe and Asia. Full details of the company's locations and other information are available on the company's website, www.ARC.com. ARC International is listed on the London Stock Exchange as ARC International plc (LSE:ARK). Statements made in this press release that are not historical facts include forward-looking statements that involve risks and uncertainties. Important factors that could cause actual results to differ from those indicated by such forward-looking statements include, among others, market acceptance of the ARC technology; fluctuations in and unpredictability of the Company's quarterly results; general economic and business conditions; regulatory policies adopted by governmental authorities; assumptions regarding the Company's future business strategy; changes in technology; competition; ability to attract and retain qualified personnel; risks associated with the Company's international operations; and other uncertainties that are discussed in the "Investment Considerations" section of the Company's listing particulars dated 28 September 2000 filed with the United Kingdom Listing Authority and the Registrar of Companies in England and Wales. The Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date such statement was first made. In view of the many applications in which its Licensees may use the ARC products, ARC cannot warrant that those applications do not infringe the patents of others ARC strongly encourages its Licensees to become familiar with the policies governing the use and licensing of intellectual property established by any organization whose standards the Licensee wishes to follow, and to review the list most standards-promulgating organizations publish, of entities that claim to have patents relating to the relevant standards or underlying technology. ARC, the ARC logo, ARCtangent, ARCangel, ARCompact, ARChitect, ARCform, CASSEIA, High C, High C/C++, SeeCode, MetaDeveloper, MetaWare, Precise Solution, Precise/BlazeNet, Precise/EDS, Precise/MFS, Precise/MQX, Precise/MQXsim, Precise/RTCS, Precise/RTCSsim are trademarks of ARC International. All other brands or product names are the property of their respective holders. Short Name: Arc Intl PLC Category Code: IR Sequence Number: 00007745 Time of Receipt (offset from UTC): 20030729T184019+0100

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