Targeting for Continued Substantial Growth in Q3 of 50% Year-Over-Year
SINGAPORE, Jan. 20 /PRNewswire-FirstCall/ -- Creative Technology Ltd.
(Nasdaq: CREAF), a worldwide leader in digital entertainment products, today
announced financial results for the second quarter of fiscal year 2005, ended
December 31, 2004. All financial results are stated in U.S. dollars.
Sales for the second quarter were up 50% to $375.1 million, from sales of
$250.4 million in the same quarter last year. Sales for the first six months
of fiscal year 2005 were $585.2 million, compared to $411.2 million for the
same period last year.
During the second quarter, Creative had a substantial investment gain of
$51.5 million. Net income for the second quarter was $25.5 million with EPS
of $0.30 before the investment gain and before a non-cash impairment charge of
$65.2 million for goodwill and intangible assets relating to the acquisition
of 3Dlabs in 2002. In accordance with U.S. GAAP, the non-cash impairment
charge is included as a component of operating expenses. This net income
compares to the same quarter last year before the benefit of a $12.3 million
tax write-back and an investment gain of $0.9 million with net income of
$28.3 million and EPS of $0.34.
Net income for the second quarter, after the investment gain of
$51.5 million and the non-cash impairment charge of $65.2 million, was
$11.8 million, with earnings per share of $0.14. This compares to the same
quarter last year after the benefit of a $12.3 million tax write-back and an
investment gain of $0.9 million, with net income of $41.5 million and EPS of
$0.50.
Net income for the first six months of the 2005 fiscal year before
investment gains of $50.3 million and a non-cash impairment charge on 3Dlabs
of $65.2 million, was $31.5 million, with earnings per share of $0.37. This
compares to the same six months last year before the benefit of a
$12.3 million tax write-back and investment gains of $24.5 million with net
income of $33.8 million and EPS of $0.41.
Net income for the first six months of the 2005 fiscal year, after the
non-cash impairment charge of $65.2 million and investment gains of
$50.3 million, was $16.6 million, with earnings per share of $0.20. This
compares to the same six months of last year after the benefit of a
$12.3 million tax write-back and investment gains of $24.5 million with net
income of $70.6 million and EPS of $0.85.
As noted in its press release issued on January 11, Creative sold two
million shares of its SigmaTel holdings in the second quarter, generating cash
proceeds of $61.5 million, with net investment gains in the period of
$51.5 million. After this sale, Creative still holds 3.7 million shares of
SigmaTel stock.
The goodwill and intangible assets impairment charge of $65.2 million in
the quarter resulted from a review of the goodwill and intangible assets of
3Dlabs done in accordance with U.S. GAAP standard SFAS142: "Goodwill and
Other Intangible Assets." Based upon the review, Creative wrote down a
portion of the goodwill and intangible assets on the balance sheet attributed
to the acquisition of 3Dlabs in 2002. This impairment charge is a non-cash
event.
"We're thrilled with the results from our holiday quarter. We sold two
million MP3 players, we grew our revenues 50% year-over-year and we posted a
substantial investment gain of $51.5 million. With the two million units sold
in the quarter, we now have sold over five million MP3 players," said Craig
McHugh, president of Creative Labs. "We had strong global demand and sales
across the board for our MP3 players, particularly for our Zen Touch, our Zen
Micro 5GB player and our MuVo Micro flash players. The Zen Micro 5GB, from
the day we launched it in late November, proved to be a huge success with our
retail launch partners, consumers and the press."
"During the quarter we began our aggressive global marketing campaign for
our Zen Micro and generated huge demand for the holidays, with the player
selling out in many retail and online stores," said Sim Wong Hoo, chairman and
CEO of Creative. "We continued the excitement at the 2005 Consumer
Electronics Show in Las Vegas this month, where we had what many described as
the hottest booth at the show, constantly packed with crowds of people buzzing
about the Zen Micro. At the show we previewed our Zen Micro Photo, which
generated significant excitement and won the prestigious 'Best of CES' award.
With the phenomenal success of the Zen Micro and our exciting new MuVo flash
players, we are going to continue to build on the strong momentum we are
achieving with our MP3 players. I believe we are extremely well positioned
against the flash products and pricing that were recently announced by Apple,
as we have superior features and broad product lines that span the entire
category. I also believe that Apple's entry into the flash market will create
more awareness in the flash market segment, and we are well positioned to
become a big beneficiary of this expanding market. We are going to continue
our aggressive marketing and improve our already strong market position, and
we are targeting to grow revenue substantially in the third quarter on a
year-over-year basis by 50%."
Outlook
For the third quarter of fiscal year 2005, Creative is targeting to grow
revenues by about 50% year-over-year, to approximately $300 million. Gross
margins are expected to be about 27%, and operating expenses are expected to
be approximately 22% of sales.
Share Buyback Program
During the quarter, Creative did not repurchase any shares under its share
buyback program.
Recent Announcements
-- At the 2005 Consumer Electronics Show in Las Vegas, Creative previewed
the Zen Micro Photo, the MP3 player featuring a stunning 262,144-color
OLED screen
-- Creative introduced the 1GB, 4GB and 5GB Zen Micro MP3 players in ten
electrifying colors
-- Creative introduced the limited edition, THX-certified Sound Blaster(R)
Audigy(R) 4 Pro sound card, featuring outstanding ADVANCED HD audio
playback quality of up to 113dB SNR and an entirely new Entertainment
Center software suite
-- Creative introduced a new category of travel speakers which attach
directly to a notebook PC screen with the TravelSound(TM) Notebook 500,
a compact, ultra-portable, eight inch speaker system with neo-titanium
microdrivers for excellent audio quality
-- Creative announced a partnership with world champion PC gamer,
Johnathan "Fatal1ty" Wendel, to collaborate on the design and technical
specifications for a variety of PC input devices and audio solutions
-- Creative introduced its Zen Micro Wireless Headphone technology based
upon the Aura LibertyLink(R) LL888 chipset
-- Creative introduced the USB Sound Blaster Audigy 2 ZS Video Editor, a
full-featured, THX-certified Sound Blaster Audigy 2 ZS USB audio
solution for true one-step video capture to burning of a DVD disc on a
desktop or notebook PC
-- 3Dlabs announced that the Wildcat(R) Realizm(TM) 100 and
200 professional graphics accelerators have been certified and selected
for the HP Workstation xw6000 and xw8000
-- Cambridge SoundWorks announced an agreement with Ready To Play that
allows customers to drop off CDs and have their music loaded onto MP3
players
Awards & Accolades
-- The Creative Zen Micro Photo won the "Best of CES 2005" award for the
"Audio To Go" category from G4techTV
-- The Creative Zen Micro received:
-- The "Editor's Choice" award from PC Magazine
-- The "Editor's Choice" award from CNET.com
-- The "Editor's Choice" award from Computer Shopper magazine
-- A 5 out 5 star rating from About.com
-- The Creative PCMCIA Sound Blaster Audigy 2 ZS Notebook won:
-- The "Extremetech Approved" award from Extremetech.com
-- The "Editor's Choice" award from PC Magazine
-- The "Editor's Choice" award from CNET.com
-- The "Editor's Choice" award from LAPTOP magazine
-- The Creative Zen Portable Media Center won the "Tip Pick" award from
Tip magazine
-- The Creative MuVo(R) TX FM won the "Editor's Choice" award from Urban
Climber magazine
-- The Creative MuVo TX was recognized as the "Best Midprice MP3 Player"
by Glamour magazine
-- The Creative Zen Touch won the "Editor's Choice" award from E-Gear
magazine
-- The Creative Sound Blaster Audigy 2 ZS won:
-- The "Gear of the Year" award from Maximum PC magazine
-- "Gear of the Year -- Best Tech of 2004" recognition from
GamersDepot.com
-- The Creative GigaWorks(TM) S750 won "Gear of the Year -- Best Tech of
2004" recognition from GamersDepot.com
-- The 3Dlabs Wildcat Realizm 200 won the "2004 Front Line Award" for the
"Hardware" category from Game Developer magazine
Listen to Creative's Q2 FY05 Analyst Conference Call:
Link to the Q2 earnings conference call live on January 20th at 1:00 p.m.
Singapore time or at 9:30 p.m. Singapore time (8:30 a.m. Eastern time) via
Creative's Investor Relations Web site:
http://us.creative.com/corporate/investor/
or by calling 800-374-2493.
A replay will be available from shortly after the end of the conference call
until February 4th via the same link from the IR web site or by calling
800-642-1687 or 706-645-9291. The reservation number to listen to the first
call is 3401464. To listen to the second call, enter reservation number
3506180.
About Creative
Creative is a worldwide leader in digital entertainment products. 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, Audigy, GigaWorks,
MuVo, Wildcat and Realizm are trademarks of Creative Technology Ltd. in the
United States and/or other countries. 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 including those related to Creative's estimated
revenue and gross margin for the quarter ended March 31, 2005. 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; major health concerns; the proliferation of sound functionality in
new products from competitors at the application software, chip and operating
system levels; 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; Creative's ability to successfully manage its expanding operations;
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 trading volume and value of
Creative's Ordinary Shares as a result of the continuing Flow Back Restriction
that commenced on June 1, 2003 and Creative's previous plan and any future
plans to delist from NASDAQ and to eliminate its U.S. 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 2004 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)
December 31, June 30,
2004 2004
ASSETS
Current Assets:
Cash and cash equivalents $246,332 $211,077
Accounts receivable, net 201,503 85,456
Inventory 334,128 183,899
Other assets and prepaids 38,605 27,156
Total current assets 820,568 507,588
Property and equipment, net 112,503 106,198
Investments 205,859 209,291
Other non-current assets 49,439 117,771
Total Assets $1,188,369 $940,848
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $233,219 $86,179
Accrued liabilities 112,637 88,542
Income taxes payable 29,131 28,160
Current portion of long term
obligations and others 7,035 7,205
Total current liabilities 382,022 210,086
Long term obligations 133,108 35,614
Minority interest in subsidiaries 4,304 3,651
Shareholders' equity 668,935 691,497
Total Liabilities and Shareholders' Equity $1,188,369 $940,848
CREATIVE TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$' 000, except per share data)
(Unaudited)
Three months ended Six months ended
December 31, December 31,
2004 2003 2004 2003
Sales, net $375,142 $250,422 $585,162 $411,238
Cost of goods sold 273,398 161,494 418,215 265,842
Gross profit 101,744 88,928 166,947 145,396
Operating expenses:
Selling, general
and administrative 56,931 47,108 96,999 84,425
Research and
development 22,620 16,800 42,338 31,638
Impairment of goodwill/
intangible assets 65,225 -- 65,225 --
Total operating
expenses 144,776 63,908 204,562 116,063
Operating (loss)
income (43,032) 25,020 (37,615) 29,333
Gain from investments,
net 51,539 937 50,335 24,507
Interest income and
other, net 5,750 5,259 7,018 6,973
Income before income taxes
and minority interest 14,257 31,216 19,738 60,813
Provision for income
taxes (2,236) 10,433 (2,771) 9,916
Minority interest
in income (178) (165) (348) (160)
Net income $11,843 $41,484 $16,619 $70,569
Basic earnings
per share: $0.14 $0.52 $0.20 $0.88
Weighted average
ordinary shares
outstanding ('000) 82,320 80,522 81,882 80,212
Diluted earnings
per share: $0.14 $0.50 $0.20 $0.85
Weighted average
ordinary shares 85,930 83,683 85,083 83,160
and equivalents
outstanding ('000)
SOURCE Creative Technology Ltd.
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Related links:
http://www.creative.com
CONTACT:
USA, Phil O'Shaughnessy, +1-408-546-6773, or
poshaughnessy@creative.com, or Asia, Wynne Leong, +65-6895-4120,
or wynne.leong@ctl.creative.com, both of Creative Technology Ltd.
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