WORLDWIDE
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CREATIVE GROWS Q2 REVENUES 50% YEAR-OVER-YEAR TO $375 MILLION
Targeting for Continued Substantial Growth in Q3 of 50% Year-Over-Year SINGAPORE - January 20, 2005- 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 Share Buyback Program Recent Announcements
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Listen to Creative's Q2 FY05 Analyst Conference Call: 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 1-800-642-1687 or 1-706-645-9291. The reservation number to listen to the first call is 3401464. To listen to the second call, enter reservation number 3506180.
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