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/
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