Creative 2002 Annual Report Download - page 49

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NOTE 16—LONG TERM OBLIGATIONS
In December 1999, prior to its acquisition by Creative, 3Dlabs issued a subordinated convertible note to an investor in the
principal amount of $7.5 million which matures in December 2004. The outstanding unpaid principal balance under the
note bears interest at a rate of 4.5% per annum, payable upon conversion, prepayment or at maturity. The holder of the
note has the option to convert all or a portion of the outstanding unpaid principal balance under the note plus interest
into shares of 3Dlabs’ common stock at a conversion price of $5.563 per share or to transfer the note to a third party. At
any time after June 2002, 3Dlabs has the option to require the noteholder to convert all or a portion of the outstanding
unpaid principal balance under the note plus interest, so long as the weighted average closing share price of 3Dlabs’
common stock is equal to or greater than the conversion price of $5.563 for twenty trading days prior to the conversion
date. In August 2002, after the closing of the acquisition of 3Dlabs by Creative, 3Dlabs, the noteholder and Creative
entered into an amendment of the convertible subordinated note agreement and convertible subordinated note to allow
the outstanding unpaid principal balance under the note plus interest to be convertible into ordinary shares of Creative,
at the conversion price equal to $18.05. To-date, no conversion has been made. 3Dlabs may prepay the outstanding
unpaid principal balance plus interest due upon thirty days’ prior written notice to the noteholder.
NOTE 17—SUBSEQUENT EVENT
Subsequent to the financial year end, a Creative subsidiary, CTC declared dividend of approximately $4 million to its
shareholders, namely BFPL and Creative. BFPL and Creative each received net dividend of $2 million.
In accordance with the joint venture agreement with BFPL as approved by Creative’s shareholders, Creative acquired from
BFPL the remaining 50% interest that it does not currently own in its building located in the International Business Park
in Singapore. The consideration paid by Creative for the 50% interest in CTC amounted to approximately $4 million.
Additionally, the Company will also repay the outstanding building-related loans of US$7.1 million to BFPL. The financial
consideration for the purchase of Creative Technology Centre Pte Ltd (“CTC”) shares was set at CTC’s audited net asset
value at 4 July 2002, based on the value of the building as determined by an independent property valuer. The acquisition
will be accounted for by the purchase method. The payment will be allocated to land and buildings, deferred tax liability
and against minority interest.
NOTE 18 – SEGMENT REPORTING
Creative operates primarily in one industry segment and provides advanced multimedia solutions for personal computers.
Creative has manufacturing plants in Singapore and Malaysia with the European distribution center located in Dublin,
Ireland and the Americas distribution center located in Milpitas, California. Creative focuses its worldwide sales and
marketing efforts predominantly through sales offices in North America, Europe and the Asia Pacific region.
The following is a summary of operations by geographical regions (in US$’000):
Years ended June 30
2002 2001 2000
External net sales:
Asia Pacific $ 141,966 $ 227,146 $ 274,101
The Americas 390,861 596,295 597,544
Europe 273,078 402,627 470,547
Consolidated $ 805,905 $ 1,226,068 $ 1,342,192