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CONTACT INFORMATION:
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Phil O'Shaughnessy
Creative Labs, Inc.
poshaughnessy@creativelabs.com
(408) 546-6773
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Wynne Leong
Creative Technology Ltd.
press_contact@ctl.creative.com
+65 6895-4120
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CREATIVE ANNOUNCES Q4 FY05 RESULTS
Revenues up over 50 Percent Year-Over-Year on 260 Percent Increase of MP3 Unit Sales; Company Reports Loss Primarily Attributable to Lower-than-Expected Selling Prices and Inventory Write Downs
SINGAPORE - August 11, 2005 - Creative Technology Ltd. (NASDAQ: CREAF), a worldwide leader in digital entertainment products, today announced financial results for the fourth quarter and fiscal year 2005, ended June 30, 2005. All financial results are stated in U.S. dollars.
Sales for the fourth quarter were up 51 percent year-over-year, coming in at $305.4 million, up from $201.8 million in revenue for the same quarter last year.
Sales for the 2005 fiscal year were up 50 percent year-over-year, coming in at $1.224 billion, up from $814.9 million for the 2004 fiscal year.
For the fourth quarter, net income was a loss of $31.9 million with EPS of a $0.38 loss per share, including an investment gain of $9.3 million. Excluding the investment gain, net income for the fourth quarter was a loss of $41.2 million with EPS of a $0.49 loss per share. This compares to net income for the same period last year of $6.6 million with EPS of $0.08, including an investment loss of $0.2 million.
Net income for the 2005 fiscal year including investment gains of $74.4 million and a non-cash impairment charge on 3Dlabs of $65.2 million, was $0.6 million with EPS of $0.01. Net income for the 2005 fiscal year excluding investment gains of $74.4 million and a non-cash impairment charge of $65.2 million, was a loss of $8.6 million, EPS of a loss of $0.10 per share. Net income for the same twelve months last year including the benefit of a $12.2 million tax write-back and investment gains of $72.6 million was $134.2 million with EPS of $1.61. Net income excluding the benefit of a $12.2 million tax write-back and investment gains of $72.6 million was $49.4 million with EPS of $0.59.
"Our Q4 unit shipments of MP3 players were up more than 260 percent year-over-year. However, this high growth was below our aggressive expectations for the period," said Craig McHugh, president of Creative Labs, Inc. "We had set our targets higher for unit volume and average selling prices for our MP3 players than we achieved in the period. Missing our targets caused us to miss our revenue goals and we were not able to reduce our inventory levels as rapidly and as much as we had expected. During the quarter, there was a decline in the value of certain components in our inventory, including flash memory and hard drives, so we needed to take an inventory write down. Even though we increased overall revenues 50 percent year-over-year, the lower-than-expected selling prices for MP3 players and the inventory write downs negatively impacted gross margins in the period. These factors combined with currency losses resulted in our loss in the period. While we are very disappointed that we reported a loss for the fourth quarter, we believe we can get closer to break-even in the current quarter and that we can return to profitability by the end of this calendar year. We plan to return to profitability by continuing to grow our MP3 business and growing our audio business following the launch of the new Sound Blaster® X-Fi™ and the new Xtreme Fidelity™ audio standard, which we introduced this week."
"While we continue to work diligently through our inventory position and are very focused on returning to profitability, we are not hesitating in driving our company forward," said Sim Wong Hoo, chairman and CEO of Creative. "Just this week, we introduced what I believe will be the future direction of audio - the new Xtreme Fidelity audio standard and its first incarnation in products, the Sound Blaster X-Fi sound cards. Over the last month we have toured the world demonstrating the new Xtreme Fidelity standard and the Sound Blaster X-Fi to the press, and the response has been phenomenal. The new Xtreme Fidelity literally wowed people as we clearly demonstrated how the Sound Blaster X-Fi family of ultra high performance sound cards can dramatically enhance MP3 and CD music, virtually any music or audio, accelerate gaming, and provide an amazing headphone experience."
"Over the past seven years we have relentlessly and painstakingly built our EAX standard to become the unified audio standard for the PC platform," continued Sim. "Xtreme Fidelity will be the fifth generation of this well-established PC audio standard, where virtually all existing games and media content under the Windows platform can be instantly enhanced without any modification."
"We also showed the press the award-winning ZEN™ Micro Photo MP3 player and the new ZEN Vision, our music, photo and video player, due to be released soon," continued Sim. "We received overwhelmingly positive responses to these exciting new products from some of the toughest and most astute reviewers. With the ZEN Vision, you can now carry all of your music, all of your photos and all of your favorite videos in the palm of your hand. I believe we now have the sexiest, most appealing and most versatile digital music, photo and video player in the world. We believe that we will greatly strengthen our product offerings in our key product categories in time for this holiday season. By next year you can expect the Xtreme Fidelity standard to be included in some of our high-end digital media players. With our huge arsenal of audio products, technologies and intellectual property, you can expect Xtreme Fidelity to proliferate into all kinds of audio products going forward."
Share Buyback Program
During the quarter, Creative did not repurchase any shares under its share buyback program.
Recent Announcements
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Creative announced the future of audio with the introduction of the highly anticipated Sound Blaster X-Fi family of ultra high-performance sound cards. Powered by the Creative X-Fi Xtreme Fidelity™ audio processor, the Sound Blaster X-Fi cards introduce Xtreme Fidelity, an entirely new audio standard for music, movies and games.
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Creative announced the ZEN Vision music, photo and video player. Featuring a stunning, 3.7-inch SharpPix™ high-resolution transflective color screen for viewing entire photo and video libraries, the ZEN Vision carries up to 15,000 songs, tens of thousands of photos, or up to 120 hours of video. The ZEN Vision supports numerous music download and subscription services, and a vast selection of popular Internet video formats. These groundbreaking music subscription services, such as Yahoo! Music Unlimited and Napster to Go, which offer unlimited access to a million songs for a low monthly fee, are not available on iTunes, because the iPod does not work with music subscription services.
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Creative announced a major breakthrough in the convergence of the PC and the home entertainment center with the introduction of the Home Theater Connect DTS-610, a standalone, self-powered encoder that easily connects a media center or standard PC to a multi-channel consumer electronics receiver.
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Creative announced that the Sound Blaster® Live! 24-bit audio processor has been selected by GIGABYTE, MSI and Shuttle Computer, as their on-board audio solution for selected PCs.
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Creative introduced Game Star, a fun interactive suite of children's PC games that immerses kids in the on-screen action by capturing their body movements with a Creative WebCam Instant to put them in interactive on-screen games.
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3Dlabs announced the Wildcat® Realizm™ 500, PCI express-based professional graphics accelerator, offering high-end graphics performance at a tremendous value to Computer-aided Design (CAD) and Digital Content and Creation (DCC) professionals.
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3Dlabs announced that its Wildcat Realizm 800 graphics technology has been selected by NEC to be incorporated in the TE6 ultra high-end graphics accelerator that powers the NEC Express workstation, and by Fujitsu Siemens Computers for its CELSIUS R630 high-end workstations. The Wildcat Realizm 800 has also been chosen for the HP Tested & Certified graphics program, and certified by leading Independent Software Vendors (ISVs) in the Computer-aided Design (CAD) and Digital Content & Creation (DCC) markets including Alias, ANSYS, Autodesk, Bentley, One Space, PTC, SOFTIMAGE and SolidWorks®.
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Awards & Accolades
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The Creative ZEN Micro received:
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A 5 out of 5 star rating from Men's Journal magazine |
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The "Editor's Recommendation" award from USERS magazine (Argentina)
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The Creative Sound Blaster Audigy® 4 Pro won the "Editor's Choice" award from GeekRevolt.com
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The Creative GigaWorks™ ProGamer G500 won the "Editor's Choice" award from TeamXbox.com
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The Creative Sound Blaster Wireless Music won the "Rave Award" for the "Best Convergence Product" category from Home Theater Magazine
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Listen to Creative's Q4 FY05 Analyst Conference Call:
Link to the Q4 earnings conference call live on August 10 at 8:00 PM Eastern time (August 11 at 8:00 AM Singapore time) via Creative's Investor Relations Web site: http://www.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 August 17 via the same link from the IR web site or by calling 1-800-642-1687 or 1-706-645-9291, reservation #5460048.
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About Creative :
Creative (NASDAQ: CREAF) 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 Zen and MuVo® MP3 players. 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, X-Fi, Xtreme Fidelity, Audigy, SharpPix, GigaWorks, Live!, Wildcat, Realizm, Zen and MuVo 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 including those related to profitability, demand for Creative's products and future products. 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; exposure to excess and obsolete inventory; accelerated declines in the average selling prices of Creative's products; 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; 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; 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 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.
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