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Creative Exceeds Top End of Expectations for Revenue and Operating Income in Q1
Achieves 35 Cents EPS Including Gains from Investments
SINGAPORE, Oct. 27 /PRNewswire-FirstCall/ -- Creative Technology Ltd. , the
worldwide leader in digital entertainment products for PC users, today announced
financial results for the first quarter of fiscal year 2004, ended September 30,
2003. All financial results are stated in U.S. dollars.
Sales for the first quarter exceeded the top end of the company's guidance of
$140 to $160 million, coming in at $160.8 million. This sales result compares
to sales of $160.6 million for the same quarter of last year.
First quarter net income was $29.1 million, and earnings per share were $0.35.
Excluding investment gains, Creative reported first quarter net income of $5.5
million or $0.07 per share, exceeding its original target of $0.05 per share.
Results for the first quarter of the current year include investment gains of
$23.6 million or $0.28 per share. Of this, $23.1 million is attributable to a
"deemed disposal" of interests in an associated company, SigmaTel, Inc.
(NASDAQ:SGTL). In September 2003, SigmaTel, Inc. raised new capital through its
initial public offering of its common stock in the U.S. As a result of the IPO,
in which SigmaTel issued approximately 7.4 million new shares, Creative's
ownership percentage in SigmaTel was reduced from 28.7% to 22.5%. In accordance
with U.S. GAAP, even though Creative did not dispose of any of its
shareholdings, this reduction in Creative's ownership percentage following the
offering is treated as a "deemed disposal," and Creative recognized a non- cash
gain from this deemed disposal. The amount of the gain represents the net
increase in Creative's share of the net assets of SigmaTel, as a result of the
IPO.
The results for the first quarter of FY04 compare to a net loss of $5.0 million
and a loss of $0.06 per share in the first quarter of the previous fiscal year.
Results for the first quarter of the previous year include investment losses of
$6.3 million or $0.08 per share.
"We met the high end of our revenue expectations, and we surpassed our income
target, reporting $0.07 per share before our large investment gains," said Craig
McHugh, president of Creative Labs, Inc. "Strong sales of our high end audio,
PDE and speaker products were key contributors to our revenue performance. Our
Asian region recovered after a weak June quarter, contributing 17% of total
revenues. In August, we had shared our expectation of returning to revenue
growth in the first half calendar year 2004. Based on our strong revenue
performance in Q1 and outlook for the current quarter, we have moved up our
timeframe for growth and we are now targeting 10% to 15% year-over-year revenue
growth in the current second fiscal quarter. We are also targeting to grow Q2
earnings per share by 20% to around $0.28. For the balance of the fiscal year,
we are targeting continued revenue growth of at least 10 percent."
"This quarter we continued our shift to products outside the PC box, with over
50% of quarterly revenues coming from sales of external products," continued
McHugh. "As part of our plan to introduce 90 new products during our first two
fiscal quarters, this quarter's product launches included the Nomad(R) Jukebox
Zen NX, the Nomad MuVo2 family, and Sound Blaster(R) Wireless Music. There is
now a compelling high-quality Creative digital entertainment solution for every
room of the home, whether you listen to music on your Sound Blaster-equipped PC,
stream wireless MP3 music throughout your house with Sound Blaster Wireless
Music, combine a NOMAD Jukebox Zen NX with Creative I-Trigue speakers in a
bedroom, or enjoy our Cambridge SoundWorks Radio or Radio CD in the kitchen."
"With the successful listing of SigmaTel, our long-term strategy of investing in
strategic partners has been re-affirmed," said Sim Wong Hoo, Chairman and CEO of
Creative Technology Ltd. "The 7.6 million SigmaTel shares we own, with a
current market value of approximately $170 million, are a clear validation of
this strategy. With these shares, in addition to our already-strong balance
sheet, we are in a position to invest aggressively in partner companies, R&D or
strategic marketing that can help secure our long term future."
Outlook
For the second quarter of fiscal year 2004, ending December 31, 2003, Creative
announced that it is planning to grow revenues by 10% to 15% over the previous
year, with revenues targeted between $250 and $265 million. Gross margins are
expected in the range of 33% to 35%, and operating expenses about the same as
the second quarter of last year, between $60 and $62 million. The Company is
targeting to grow Q2 earnings per share by 20% to around $0.28.
Based on the Company's current outlook, for the balance of the fiscal year
Creative announced that it is targeting continued revenue growth of at least 10
percent.
Share Buyback Program
During the quarter, Creative did not repurchase any shares under its share
buyback program.
Recent Announcements
-- Creative reshaped digital audio with the new NOMAD MuVo2 line of
ultra-compact, lightweight MP3 players featuring removable batteries
and in either a 1.5GB hard-drive model or in rugged 512MB and 1GB
flash-memory based NOMAD MuVo2 X Trainer models
-- Creative advanced the PC audio standard to 7.1 surround sound with the
introduction of the Sound Blaster Audigy(R) 2 ZS sound card and the
Creative GigaWorks S750 speaker system. This powerhouse duo provides
gamers with unprecedented power and precision, plus DTS-ES(TM) decoding
and 108dB SNR across eight channels for unsurpassed PC audio quality
from DVD movies
-- Creative further fueled the shift to 7.1 surround sound with the
value-priced Creative Inspire(R) 7.1 7700 speaker system, priced at
only US $149.99
-- Creative introduced the first 7.1 surround sound solution for notebook
PCs with the external Sound Blaster Audigy 2 NX, providing a new
dimension in audio for movies, games and music for notebook PC users
-- Legendary Sound Blaster audio quality went wireless with the
introduction of the Sound Blaster(R) Wireless Music , designed to play
entire MP3 and WMA music collections stored on your PC, anywhere in the
home
-- Creative launched the super compact, ultra-stylish Rhomba brand of
feature-rich 128MB and 256MB MP3 players with a large split screen LCD,
FM tuner and built-in microphone
-- Creative announced publication of a U.S. patent application for its
innovative, award-winning NOMAD MuVo(TM) Portable Audio Player
-- Creative introduced the NOMAD(R) Jukebox Zen Xtra -- 30GB, 40GB and
60GB MP3 players featuring a large backlit LCD for easy navigation plus
capacity for up to 2,000 hours of digital music
Awards & Accolades
-- The NOMAD MuVo(TM) NX won an "Editor's Choice" award from PC Magazine
-- The NOMAD MuVo won:
-- A 5 out of 5 rating and the "Stuff Approved Pick of the Litter
Award" from Stuff magazine
-- The 2004 "Skier's Choice" Award from Powder magazine
-- The NOMAD Jukebox Zen NX was honored as a TechTV "Lab Pick"
-- The NOMAD Jukebox Zen was included in the "Best Buys of 2003" in Money
magazine
-- Sound Blaster Wireless Music was featured as "Gadget of the Week" on
Time.com
-- The Creative I-Trigue(TM) L3500 speaker system won the "Editor's
Choice" award from TechEdge magazine
-- The Sound Blaster Audigy 2 Platinum eX was named "Best Sound Card" in
Computer Shopper magazine
-- The Creative Prodikeys was included in the Top 100 Products of 2003 in
PC World Latin America
Listen to Creative's Q1 FY04 Analyst Conference Call:
Link to the Q1 earnings conference call live on October 27th at 7:00 PM U.S.
Eastern time via Creative's Investor Relations Web site:
http://us.creative.com/corporate/investor/
or by calling 1-800-374-2493.
A replay will be available from shortly after the end of the conference call
until November 3rd via the same link from the IR web site or by calling
1-800-642-1687, reservation # 3310974.
About Creative
Creative is a worldwide leader in digital entertainment products for PC users.
Famous for its Sound Blaster audio cards and for launching the multimedia
revolution, Creative is now driving digital entertainment on the PC platform
with products like its highly acclaimed NOMAD Jukebox. Creative's innovative
hardware, proprietary technology, applications and services leverage the
Internet, enabling consumers to experience high-quality digital entertainment --
anytime, anywhere.
This announcement refers to products and pricing sold in the United States of
America. Pricing and product availability are subject to change without notice.
Sound Blaster, I-Trigue, Creative TravelSound, MegaWorks, Creative Inspire,
Audigy, MuVo and Creative CardCam are trademarks or registered trademarks of
Creative Technology Ltd. in the United States and/or other countries. 3Dlabs and
Wildcat are registered trademarks of 3Dlabs, Inc. Ltd. NOMAD is a registered
trademark of Aonix and is used by Creative Technology Ltd. and/or its affiliates
under license. All other brand and product names are trademarks of their
respective holder and are hereby recognized as such.
Safe Harbor for Forward-Looking Statements:
This press release contains forward-looking statements. These forward-looking
statements represent Creative's expectations or beliefs concerning future events
and include statements, among others, regarding Creative's expected revenue,
gross margin, operating expenses, and earnings per share for the quarter ending
December 31, 2003 and revenue for the balance of the fiscal year. These
forward-looking statements involve risks and uncertainties that could cause
Creative's actual results to differ materially. Such risks and uncertainties
include: Creative's ability to timely develop new products that gain market
acceptance and to manage frequent product transitions; competitive pressures in
the marketplace; Creative's ability to successfully integrate acquisitions;
potential fluctuations in quarterly results due to the seasonality of Creative's
business and the difficulty of projecting such fluctuations; possible disruption
in commercial activities caused by factors outside of Creative's control, such
as terrorism, armed conflict and labor disputes; a reduction in demand for
computer systems, peripherals and related consumer products as a result of poor
economic conditions, social and political turmoil and major health concerns,
such as the spread of Severe Acute Respiratory Syndrome, or SARS; the
proliferation of sound functionality in new products from competitors at the
application software, chip and operating system levels; the failure of
cost-cutting measures to achieve anticipated cost reduction benefits; the
deterioration of global equity markets; exposure to excess and obsolete
inventory; Creative's reliance on sole sources for many of its chips and other
key components; component shortages which may impact Creative's ability to meet
customer demand; Creative's ability to protect its proprietary rights; a
reduction or cancellation of sales orders for Creative products; accelerated
declines in the average selling prices of Creative's products; the vulnerability
of certain markets to current and future currency fluctuations; the effects of
restricted fuel availability and rising costs of fuel; fluctuations in the value
and liquidity of Creative's investee companies; and the potential decrease in
the trading volume and value of Creative's Ordinary Shares as a result of
Creative's intended delisting from NASDAQ and elimination of its U.S. public
reporting obligations. For further information regarding the risks and
uncertainties associated with Creative's business, please refer to its filings
with the SEC, including its Form 20-F for fiscal 2002 filed with the SEC.
Creative undertakes no obligation to update any forward-looking statement to
conform the statement to actual results or changes in Creative's expectations.
CREATIVE TECHNOLOGY LTD.
CONSOLIDATED BALANCE SHEETS
(In US$' 000)
(Unaudited)
September 30, June 30,
2003 2003
ASSETS
Current Assets:
Cash and cash equivalents $210,113 $232,053
Accounts receivable, net 85,609 61,225
Inventory 115,674 80,367
Other assets and prepaids 13,007 11,269
Total current assets 424,403 384,914
Property and equipment, net 103,242 104,404
Investments 67,808 49,168
Other non-current assets 132,904 108,357
Total Assets $728,357 $646,843
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $88,649 $52,869
Accrued liabilities 83,697 79,573
Income taxes payable 38,201 37,564
Current portion of long term obligations and
others 5,495 5,519
Total current liabilities 216,042 175,525
Long term obligations 38,667 39,027
Minority interest in subsidiaries 3,449 3,454
Shareholders' equity 470,199 428,837
Total Liabilities and Shareholders' Equity $728,357 $646,843
CREATIVE TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$' 000, except per share data)
(Unaudited)
Three months ended
September 30,
2003 2002
Sales, net $160,816 $160,623
Cost of goods sold 104,348 102,630
Gross profit 56,468 57,993
Operating expenses:
Selling, general and administrative 37,317 42,155
Research and development 14,838 15,267
Total operating expenses 52,155 57,422
Operating income 4,313 571
Gain (loss) from investments, net 23,570 (6,316)
Interest income and other, net 1,714 807
Income (loss) before income taxes and minority
interest 29,597 (4,938)
Provision for income taxes (517) (57)
Minority interest in loss 5 18
Net income (loss) $29,085 $(4,977)
Basic earnings (loss) per share: $0.36 $(0.06)
Weighted average ordinary shares outstanding
('000) 79,902 78,877
Diluted earnings (loss) per share: $0.35 $(0.06)
Weighted average ordinary shares
and equivalents outstanding ('000) 82,638 78,877
DATASOURCE: Creative Technology Ltd.
CONTACT: USA, Lisa Laymon, Investor Relations Manager, +1-408-546-6106,
or , or Asia, Elizabeth Loo, Investor Relations,
+65-6895-4881, or , both of Creative Technology Ltd.
Web site: http://www.creative.com/