Creative Labs, Inc.
CREATIVE TECHNOLOGY REPORTS
SECOND QUARTER FY2003,
WITH EARNINGS PER SHARE ABOVE EXPECTATIONS
SINGAPORE - Jan. 28, 2003 -
Creative Technology Ltd. (Nasdaq: CREAF), the worldwide leader in digital entertainment products for PC users, today announced financial results for the second quarter of fiscal year 2003, ended December 31, 2002. All financial results are stated in U.S. dollars.
Sales for the second quarter were $230.9 million, in line with the Company's guidance. This compares to sales of $249.5 million for the same quarter of last year. Creative achieved net income for the second quarter of $18.9 million, and earnings per share were above the Company's expectations at $0.23.
The effects of the 3Dlabs acquisition in the second quarter, which were included in Creative's overall results above were: a revenue contribution of $14.6 million and gross margin of 44% or $6.4 million, with operating expenses of $11.0 million inclusive of $2.5 million for amortization of intangible assets.
Excluding the effects of the 3Dlabs acquisition, Creative achieved second quarter net income of $23.3 million or $0.29 per share. This compares to last year's second quarter net income of $26.3 million and EPS of $0.36.
Sales for the first six months of fiscal year 2003 were $391.6 million, compared to $429.9 million for the same period last year. Net income for the first six months of fiscal 2003 was $13.9 million or $0.17 per share, compared to net income of $13.5 million or $0.18 per share for the same period last year. Net income for the first six months of fiscal 2003 includes net investment losses of $6.1 million or $0.08 per share. Net income for the first six months of the previous year includes net investment losses of $15.7 million or $0.21 per share.
Commenting on the quarter, Craig McHugh, president of Creative Labs, Inc. noted, "Our strategy to leverage the Creative brand with a broadening range of products outside of the PC played an important part in our success during the holiday quarter. We saw strong demand in the quarter for some of our newest products including our NOMAD MuVo and NOMAD ZEN, which helped us to achieve our revenue, margin and profit goals in what proved to be a difficult quarter for many retailers and the tech industry as a whole. Approximately 50% of our revenues in the second quarter came from products outside the PC, including our NOMAD digital audio players, Cambridge SoundWorks and Creative branded speakers, and our family of WebCams. Revenues from our NOMAD family of digital audio players, including the MuVo and NOMAD ZEN, were up over 100% year-over-year; and we also generated the highest-ever revenue contribution from our speaker business during the quarter. As we continue to broaden our product offerings, we believe we can appeal to an even broader base of mass market consumers, beyond our traditional PC market."
"We just had our first major presence at the Consumer Electronics Show in Las Vegas," said Sim Wong Hoo, Chairman and CEO of Creative Technology. "The breadth of our product lines made Creative one of the most exciting and talked-about companies at the show, drawing huge crowds and great media attention. Consumers, partners and members of the press were truly amazed by the wide array of products we showcased. One of our new and exciting products, the Prodikeys, the world's first integrated music and PC keyboard, won the 'Best of CES' award in the Home Audio category and was also named in Jon Peddie's Tech Watch as one of the 'Best of CES'. This demonstrates how Creative is successfully leveraging the power of the PC to expand upon the capabilities of consumer electronics."
Plan to Move to a Single Exchange Listing on SGX-ST
Creative announced in a separate press release today that the Company intends to take steps toward moving to a single primary exchange listing on the main board of the Singapore Exchange Securities Trading Limited (SGX-ST) including decreasing the number of U.S. resident shareholders and option holders, eliminating its SEC public reporting obligations and delisting from the NASDAQ exchange. Further details are available in the noted release.
Share Buyback Program
During the quarter, Creative did not repurchase any shares under its share buyback program.
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About Creative Labs
This announcement refers to products and pricing sold in the United States of America. Pricing and product availability is subject to change. Sound Blaster and the Creative logo are registered trademarks and Live! is a trademark of Creative Technology Ltd. in the United States and other countries. Cambridge SoundWorks is a registered trademark of Cambridge SoundWorks, Inc. in the United States and/or other countries. 3Dlabs and Wildcat are trademarks or 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 either trademarks or registered trademarks of their respective holder and are hereby recognized as such.
Safe Harbor for Forward-Looking Statements Under The Private Securities Litigation Reform Act of 1995:
Except for the historical information contained herein and in the corresponding conference call, the matters set forth in this release and in the call are forward-looking statements and are subject to certain risks and uncertainties that could cause 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 products, including Creative's products, as a result of poor economic conditions and social and political turmoil; 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 continued deterioration of global equity markets; increased 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 or other unexpected or unplanned events that could cause Creative to miss its revenue guidance, operating expense projections or negatively impact its margins; 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, its press release, dated March 11, 2002, announcing the signing of a definitive agreement to acquire 3Dlabs and 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.