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SINGAPORE - October 28, 2003 - Creative Technology Ltd. (Nasdaq: CREAF), 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® Jukebox Zen NX, the Nomad MuVoｲ family, and Sound Blaster® 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
Awards & Accolades
- 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
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About Creative
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. Apple and iPod are trademarks of Apple Computer, Inc., registered in the U.S. and 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 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.