Creative 2000 Annual Report Download - page 40

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40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – ACQU ISITIONS AND INVESTMENTS (Cont’d)
The following unaudited pro forma information has been prepared assuming that the above acquisitions had taken place at
the beginning of fiscal year 1998. The amount of the aggregate purchase price allocated to in-process research and development
has been excluded from the pro forma information as it is a non-recurring item. The pro forma financial information is not
necessarily indicative of the combined results that would have occurred had the acquisitions taken place at the beginning
of fiscal year 1998, nor is it necessarily indicative of results that may occur in the future.
Unaudited Pro Forma
In US$’000, except for per share data for the year ended
June 30, 1998
Sales, net $ 1,287,095
Net income $ 192,179
Basic earnings per share $ 2.12
Diluted earnings per share $ 2.02
On May 22, 1998, Creative acquired all the outstanding shares of Silicon Engineering, Inc. (“SEI”), a privately-held
company based in Scotts Valley, California. SEI designs and develops integrated circuits for the multimedia, storage and
communications markets. The consideration for this acquisition was the issuance of 921,271 Ordinary Shares of Creative
plus an additional 102,314 shares that were issued in fiscal 1999, upon expiration of the contingency period. The acquisition
has been accounted for as a pooling of interests. However due to its immateriality, results of operations have been included
from the date of acquisition rather than restating prior periods in accordance with pooling of interests accounting.
Investments
In accordance with Statement of Financial Accounting Standards No. 115 (SFAS 115), Creative carried its available-for-
sale quoted investments at their fair market value, which resulted in unrealized gains of $173.9 million and $15.4 million
being included in shareholders’ equity in fiscal 2000 and 1999, respectively. Included in the results of operations for fiscal
2000 and 1999, are net gains from quoted investments of $94.7 million and $15.0 million, respectively.
NOTE 16 – SUBSEQUENT EVENT
In July 2000, a subsidiary’s options granted to certain employees of Creative in May 2000 to acquire 0.47 million ordinary
shares at an exercise price of $2.50 and 0.06 million shares at $1.00 per share were cancelled. In lieu of the cancellation
of the said options, the subsidiary granted replacement options to these employees to acquire 0.24 million and 0.03 million
of the subsidiary’s shares at an exercise price of $2.50 per share and $1.00 per share respectively. The replacement options
vest immediately on grant date and the compensation expense arising from full vesting of the replacement options amounted
to $0.8 million.