Company Press Release
SOURCE: Creative Technology Ltd.
Creative Announces Record Second Quarter Earnings
Earnings Up 32 Percent Before Charges for Acquisitions
SINGAPORE, Jan. 23 /PRNewswire/ -- Creative Technology Ltd. (Nasdaq: CREAF - news), the leading
provider of multimedia products for personal computers, today announced financial results for the second
quarter of fiscal 1998 ended January 2, 1998.
Sales for the second quarter of fiscal 1998 were US$395.0 million, up from US$386.0 million for the
same quarter last year. Sales for the first six months of fiscal 1998 were US$682.8 million, up from
US$670.1 million for the same period last year.
Before one-time write-offs for in-process technology related to acquisitions in the quarter:
Net income for the quarter was US$75.0 million, up from US$56.9 million for the same quarter
last year -- an increase of 32 percent.
Earnings per share for the quarter were US$0.79, up from US$0.64 for the same quarter last year.
Net income for the first six months of fiscal 1998 was US$126.6 million, up from US$71.6 million
for the same period last year - an increase of 77 percent.
Earnings per share for the first six months of fiscal 1998 were US$1.34, up from US$0.81 for the
same period last year.
(The results for the first six months of fiscal 1998 exclude a gain of US$18.5 million or US$0.19
per share from the sale of quoted investments in the first quarter of fiscal 1998.)
After one-time write-offs -- totaling US$60.3 million -- for in-process technology related to the
acquisitions of ENSONIQ, Cambridge SoundWorks and the NetMedia group of OPTi, the results for the
second quarter of fiscal 1998 were: Net income of US$14.7 million and earnings per share of US$0.15.
After the same one-time write-offs for the acquisitions in the second quarter, and including a gain of
US$18.5 million or US$0.19 per share from the sale of quoted investments in the first quarter of fiscal
1998, the results of the first six months of fiscal 1998 were: Net income of US$84.7 million and earnings
per share of US$0.89.
''Our second quarter was a period of significant accomplishments -- both in our strong financial results
and in driving towards our long term strategic goals,'' said Sim Wong Hoo, chairman and chief executive
officer of Creative Technology Ltd. ''I believe our financial results were particularly impressive given the
macro-economic issues in Asia. For example, our revenue this quarter, excluding Asia, grew by 11
percent compared to last year. We grew our cash position to over half a billion dollars, of which we have
used US$130 million for key strategic acquisitions. With a formidable cash position of US$376 million at
the end of the quarter, we are very well positioned to execute our growth plan. These financial results are
a direct reflection of the spectacular efforts of our people and the quality of our products.
''Looking toward the coming year and beyond, we are very optimistic about our prospects,'' said Sim.
''Our three acquisitions give us significant additional strength in attacking key, high-volume, high-growth
markets, particularly the sub $1,000 PC and the notebook computer segments. While the
macro-economic issues that originated in Asia create uncertainties, the calendar year ahead promises
enormous opportunities for our new products. Our newest audio products should dazzle the industry and
allow us to sweep the market. We continue to enhance and cost-reduce our PC-DVD Encore(TM)
products and to build upon our leadership in that potentially explosive market. Cambridge SoundWorks'
speakers are a perfect fit with our PC-DVD and Environmental Audio(TM) initiatives and offer
tremendous revenue opportunities. And we feel that, with our strategic partners 3Dlabs and 3Dfx, our
opportunities in graphics are better than ever. In sum, we are armed to the teeth, and ready to expand our
markets into the 21st century.''
Recent Announcements
Creative has made a number of announcements in the past several months that further its leadership
position in the industry. These announcements include:
The acquisitions of Cambridge SoundWorks, ENSONIQ and the NetMedia group of OPTi: These
acquisitions make Creative the first company to deliver all the key components required to
experience Environmental Audio. Furthermore, the acquisition of ENSONIQ enables Creative to
extend its reach in the PCI audio segment of the high-volume PC OEM market with key OEM
customers such as Hewlett-Packard and Gateway 2000.
EMU10K1(TM) and Environmental Audio(TM): With over two million transistors and more than
1,000 MIPS of raw processing power, the EMU10K1 audio processor -- which will be used in
Creative's new Sound Blaster Live! audio card -- is the cornerstone of Creative's new
Environmental Audio platform. The new Sound Blaster Live! and Environmental Audio has been
hailed as the future of audio for the 21st century, and at its COMDEX Fall '97 unveiling was
described as ''articulating and demonstrating a vision that will inspire and drive the industry,'' by
Jon Peddie Associates analyst Andy Fischer.
DeskTop Theater(TM) 5.1 Speaker System: Cambridge SoundWorks and Creative previewed the
world's first fully integrated Dolby(R) Digital 5.1 surround sound system for multimedia
computers. The DeskTop Theater 5.1 is an amplified, high-performance, six-channel, surround
sound speaker system that offers affordable, theater-quality surround sound to a desktop system.
3D Blaster Voodoo2: In this quarter, Creative previewed its soon-to-ship game platform, the 3D
Blaster Voodoo2. Incorporating the highly anticipated Voodoo 2 chip-set from 3Dfx Interactive,
the 3D Blaster Voodoo2 is the gaming industry's fastest 3D gaming card.
Accolades and Recommendations
Creative continued its string of stellar reviews from top industry publications including:
A ''Best Buy'' rating from PC World; an ''Editor's Choice'' review in PC Gamer; and a top notch
review in PC Magazine's ''First Looks'' section for Creative's PC-DVD Encore product.
A ''Best Buy'' rating from Consumer Reports for Cambridge SoundWorks Ensemble III speaker
line; and top reviews and numerous awards for the PC Works, SoundWorks and MicroWorks
speakers including an ''Editor's Choice'' Award from PC Gamer, a ''Reviewer's Choice'' Award
from HomePC, and an ''MVP Award'' from PC Computing.
An ''Editor's Choice'' Award in Electronic Musician for Sound Blaster AWE64 Gold which also
garnered the 1997 MVP Award from PC Computing, along with an ''Editor's Choice'' Award from
PC Magazine and the ''Best Buy'' Award from Computer Shopper.
A report in Computer Retail Week -- based on information from PC Data -- placing Creative's
Graphics Blaster 3D as the most popular 2D/3D graphics accelerator in retail.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Except for the historical information contained herein or in the accompanying conference call, the
statements herein and in the call (including information on future products, future marketing efforts, and
future revenues, margins, expenses and earnings) are forward looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ materially from those set forth in
the forward looking statements. Such statements are subject to the attached cautionary statements which
are provided pursuant to The Private Securities Litigation Reform Act of 1995.
Creative Technology Ltd. develops, manufactures and markets a wide array of advanced multimedia
solutions for the PC, entertainment, education, music and productivity tools markets. Creative's products
are marketed through both the OEM and retail channels under a variety of trademarks, including the
''Blaster'' family name. Sound Blaster(R) has become the multimedia industry's de facto audio standard.
Sound Blaster is an audio platform consisting of a sound card or chipset, software drivers and bundled
software applications that enable PCs to produce high quality audio. Creative's corporate headquarters and
primary manufacturing are based in Singapore, with sales, distribution and research and development
being carried out through an extensive, global network of subsidiaries located in North America, Europe,
Asia and Africa.
Safe Harbor for Forward Looking Statements:
Except for the historical information contained herein and in the accompanying conference call on today's
date, the matters set forth herein and in the accompanying conference call (including information on
future products, future marketing efforts, and future revenues, margins, expenses and earnings) are
forward looking statements that are subject to certain risks and uncertainties that could cause actual
results to differ materially from those set forth in the forward looking statements. Such risks and
uncertainties include, among others: potential fluctuations in quarterly results due to the seasonality of
Creative's business and the difficulty of projecting such fluctuations; the vulnerability of certain markets
to currency fluctuations and credit shortages; reductions in the market value of products sold by
Creative, including increases in supply or declines in demand or prices for CD-ROM or DVD drives,
board and chip-level products, and software products; the short product cycles that characterize most of
Creative's products; the increasing proliferation of sound functionality in new products from new
competitors and at the application software, chip and operating system levels; Creative's reliance on sole
sources for many of its chips and other key components; the timely development, ramp, delivery and
market acceptance of new products, including Creative's next generation sound chips, and its graphics
accelerator, video conferencing, CD-ROM and DVD drives, DVD decoder cards, communications and
Internet-related products; the availability of operating capital on acceptable terms; the volatility of share
prices for companies in Creative's industry and the effect of those prices or other events beyond
Creative's control; and other risk factors described in Creative's filings with the Securities and Exchange
Commission over the past twelve months.
NOTE: Sound Blaster is a registered trademark and Blaster is a trademark of Creative Technology Ltd. All
other products mentioned herein are trademarks of their respective owners and are hereby recognized as
such.
CREATIVE TECHNOLOGY LTD.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In US$' 000, except per share data)
(Unaudited)
December, 31 June, 30
1997 1997
ASSETS
Current assets:
Cash and cash equivalents $375,840 $417,943
Accounts receivable, less
allowances of $20,049
and $21,726 142,315 119,848
Inventory 143,041 69,250
Other assets and prepaids 15,071 12,510
Total current assets 676,267 619,551
Property and equipment, net 101,436 94,582
Investments and other
non-current assets 130,408 100,685
$908,111 $814,818
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $137,764 $116,861
Other accrued liabilities 89,916 94,843
Income taxes payable 40,041 35,711
Current portion of long
term obligations 260 215
Total current liabilities 267,981 247,630
Long term obligations 36,055 33,711
Minority interest in
subsidiaries 8,394 10,872
Shareholders' equity:
Ordinary Shares ('000);
S$0.25 par value ; 9,349 9,060
Authorized: 200,000 shares
Outstanding: 90,793 and
88,932 shares
Additional paid-in capital 150,626 138,741
Unrealized holding gains on
quoted investments 46,505 70,343
Retained earnings 389,201 304,461
Total shareholders' equity 595,681 522,605
$908,111 $814,818
CREATIVE TECHNOLOGY LTD.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
( In US$' 000, except per share data)
(Unaudited)
Three months ended Six months ended
December 31, December 31,
1997 1996 1997 1996
Sales $395,010 $386,048 $682,776 $670,073
Cost of goods sold 264,933 276,622 457,971 505,964
Gross profit 130,077 109,426 224,805 164,109
Operating expenses:
Selling, general and
administrative 41,150 37,824 75,616 67,868
Research and
development 11,985 9,512 20,966 17,611
Write off of acquired
in-process
technology 60,300 -- 60,300 --
Total operating
expenses 113,435 47,336 156,882 85,479
Operating income 16,642 62,090 67,923 78,630
Gain on sale of quoted
investments -- -- 18,469 --
Interest income and
other, net 6,276 2,387 11,281 3,030
Income before income
taxes and minority
interest 22,918 64,477 97,673 81,660
Provision for income
taxes (8,332) (7,631) (13,960) (10,209)
Minority interest in
loss 86 80 1,027 129
Net income $14,672 $56,926 $84,740 $71,580
Basic earnings
per share: $0.16 $0.65 $0.95 $0.81
Average ordinary shares
outstanding ('000) 90,167 88,248 89,614 88,231
Diluted earnings
per share: $0.15 $0.64 $0.89 $0.81
Average ordinary shares
and equivalents
outstanding ('000) 95,031 89,046 94,730 88,630
SOURCE: Creative Technology Ltd.
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