Fractal Design Corporation announced record revenue for its first fiscal quarter of 1997, ended June 30, 1996. For the quarter, Fractal and Ray Dream's combined net revenues were $8,480,000, an increase of 40% over revenues of $6,044,000 in the first quarter a year ago.

Operating income for the combined operations for the quarter ended June 30, 1996, before a $1,865,000 one-time charge to earnings for the May 1996 acquisition of Ray Dream Inc., was $1,393,000, an increase of 52% percent from $916,000 in the same period one year ago. Net income for the quarter, before the one-time merger charge was $1,150,000 or $.09 per share, up 99% percent from the $579,000 and $.06 per share from the prior year.

The June 30, 1996 per share amounts reflect fully diluted shares of 13,143,000 and include the impact of an increase of 2,375,000 shares issued in November 1995 in connection with the Company's initial public offering.

After giving effect to the one-time merger charge the company had a net loss of $(449,000) or $(.04) per share based on 11,686,000 shares actually outstanding.

Current year results reflect a tax rate of 31%, before giving effect to the one-time charge, while the previous year's results reflect a tax rate of 40%.

Ray Dream Acquisition Completed

In May 1996 Fractal completed its acquisition of Ray Dream, Inc., of Mountain View, California. Ray Dream is a leading provider of 3D illustration and animation software. With the acquisition, Fractal extended the breadth of its product line and its ability to deliver new products to artists and designers.

With the combined two-dimensional (2D) and three-dimensional (3D) product lines the Company believes it will be even more effective in helping artists and designers extend their range of creativity in digital art.

New Product Announcements, Shipments and Awards

"Our first quarter results were highlighted by the completion of our acquisition of Ray Dream," said Mark Zimmer, Fractal's chairman and chief executive officer. "During the quarter we also shipped the first Japanese version of Painter for the Windows environment.

"At PC Expo we also announced, what we think will be, a major new product for Fractal. We believe this product, Fractal Design Expression(TM), is a significant technological advancement in graphic illustration software. Expression re-invents 'Draw' in the same way that Painter re-invented 'Paint.' We are excited about bringing the next generation of graphic illustration tools to market-the first fruit the Fractal Design and Ray Dream merger."

The people at PC Expo were so impressed with this new product that they gave it the "Best of Show" for Multimedia Software.

"During the quarter we shipped the Fractal version of Ray Dream Designer and Studio for Windows," added Mr. Zimmer. Fractal Designs' Ray Dream Studio for Windows(TM) Version 4.1 delivers many frequently requested features, including support for Microsoft's Direct3D(TM) and Apple's QuickDraw 3D(TM) standards. Version 4.1 also includes new Internet support including a direct VRML export filter and support for GIF and JPEG file formats. Other new features include visible motion paths, new levels of anti-aliasing and the ability to use the QuickDraw 3D (3DMF) format on both Macintosh(R) and Windows platforms."

Macintosh/Windows

"During the quarter ended June 30, 1996 revenue on a combined basis from our Macintosh and Windows based products was 56% and 44% respectively," stated Les Wright, Fractal's Chief Operating Officer. During the same quarter last year our Macintosh products contributed 66% of revenue. We are pleased to see our Windows based products contribute a greater percentage of our total revenues."

"Because of the significant amount of our revenue being sold on the Macintosh platform we are, of course, concerned about the weakening operating results and revenue trends at Apple Computer," said Eric Hautemont, Fractal's President. "While we remain concerned with our Macintosh based business we are pleased with the growth of our Windows based business and are taking steps to further strengthen our Windows business. For example, during the last quarter we shipped, for the first time, Painter 4.1 on Windows for the Japanese market. We also shipped Ray Dream Studio/Designer 4.1 for Windows. Our new product, Expression, is scheduled to ship first on the Windows platform. While we monitor the trends in the platform market, we intend to keep our primary focus on our customers, artists and designers."

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