Creative 1999 Annual Report Download
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Table of contents
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Page 1
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Page 2
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Page 3
...Chairman's Message Profile of Creative Selected Consolidated Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Report of Independent Accountants Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Cash Flows...
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Page 4
... of the Sound Blaster family of sound cards designed for the best digital audio solution for music, games and Internet entertainment. Besides having all the powerful features of the high end Sound Blaster Live!, the Sound Blaster Live! Platinum comes with the Live!Drive front panel that offers...
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Page 5
... encoding or 4 hours of voice-recording. DeskTop Theater 5.1 DTT2500 Digital is a high-performance digital home theater speaker system that delivers powerful Dolby Digital 5.1 multi-channel sound for movies from a PC-DVD or DVD player and enhances 3D positional audio in games or music. It comes...
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Page 6
...as CD-ROM drives and low end graphics cards - as well as for third party commodity products. We think this low-cost, low-risk channel has great promise for both Creative and for our customers. A second key element of our Internet plans is the development of a group of Internet applications and sites...
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Page 7
... internet access solutions such as ADSL G.LITE products. Personal Digital Entertainment products including the Creative NOMAD line of portable digital audio players capable of playing MP3 audio files downloaded from the Internet. Electronic musical instruments and other PC peripheral and software...
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Page 8
... and related notes thereto included elsewhere in this Annual Report.
CONSOLIDATED STATEMENTS OF OPERATIONS DATA (US$'000, EXCEPT PER SHARE DATA):
For the years ended June 30 1999 1998(1) 1997 1996 1995
Sales, net Cost of goods sold
Gross profit
$ 1,296,537 944,499
352,038
$ 1,234,208 848...
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Page 9
Selected Consolidated Financial Data
CONSOLIDATED BALANCE SHEETS DATA (US$'000):
As of June 30 1999 1998 1997 1996 1995
Cash and cash equivalents Working capital Total assets Long-term debt, net of current maturities Shareholders' equity
$
318,990 400,998 805,689 28,642 560,261
$
417,262 484,...
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Page 10
... used in Creative's products; the timely ramp, delivery and market acceptance of new products, including Creative's next generation audio, graphics accelerator, CD-ROM and DVD drives and communications products; the volatility of share prices for companies in Creative's industry and the effect...
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Page 11
...-
14 %
Creative's external net sales, by product category, for the past three fiscal years were as follows:
Percentage of External Net Sales for fiscal years ended June 30 1999 1998 1997
Audio products Multimedia Upgrade Kits Graphic & Video products Speakers/ Communication/ Other products
38% 27...
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Page 12
...three acquisitions recorded under the purchase method of accounting, resulting in an aggregate write off of acquired in-process technology of $60.3 million (see Note 14 of "Notes to Consolidated Financial Statements") and a one-time charge of $8.3 million for the cessation of certain activities. Net...
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Page 13
... acquisitions recorded under the purchase method of accounting, resulting in an aggregate write off of acquired in-process technology of $60.3 million (see Note 14 of "Notes to Consolidated Financial Statements") and a one-time charge of $8.3 million for the cessation of certain activities. Included...
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Page 14
..., 1999, together with the percentage of sales represented by such results. Consistent with the PC peripheral market, due to consumer buying patterns, demand for Creative's products is generally stronger in the quarter ended December 31, compared to any other quarter of the fiscal year. In management...
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Page 15
... write-off of acquired in-process technology resulting from the acquisitions of Ensoniq Corporation, Cambridge SoundWorks, Inc. and the NetMedia Division of OPTi Inc. Net interest and other income were inclusive of net gain from sale of investments of: $12.6 million for quarter ended June 30, 1999...
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Page 16
...used to pay dividends (See Note 7 of "Notes to Consolidated Financial Statements"), $5.2 million to reduce long-term obligations and minority shareholders' loan and equity balance. This was offset by a $5.2 million cash inflow from the exercise of share options. Cash provided by financing activities...
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Page 17
.... Creative has reviewed and tested its current products to ensure that all current hardware and software products designed and manufactured by Creative are Y ear 2000 compliant. Creative's core IT business systems - hardware, operating systems, systems software, networking and applications software...
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Page 18
Management's Discussion and Analysis of Financial Condition and Results of Operations
YEAR 2000 (Cont'd)
Creative does not have a separate budget set aside relating to Y ear 2000 issues. As Creative is continually upgrading and improving its information technology systems and facilities, the costs ...
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Page 19
... operations, of cash flows and of shareholders' equity present fairly, in all material respects, the financial position of Creative Technology Ltd. and its subsidiaries at June 30, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended...
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Page 20
Consolidated Balance Sheets
(In US$'000, except per share data)
June 30 1999 ASSETS Current assets: Cash and cash equivalents Accounts receivable, less allowances of $12,721 and $14,074 Inventory Other assets and prepaids Total current assets June 30 1998
$
318,990 130,144 148,028 12,709
609,871...
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Page 21
...US$'000, except per share data)
Years ended June 30 1999 1998 1997
Sales, net Cost of goods sold
Gross profit
$ 1,296,537 944,499
352,038
$ 1,234,208 848,305
385,903
$ 1,232,957 893,432
339,525
Operating expenses: Selling, general and administrative Research and development Other charges (Notes...
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Page 22
... from sale of quoted investments Purchase of new subsidiaries (net of cash acquired) Increase in other investments and assets, net Net cash used in investing activities Cash flows from financing activities: (Decrease)/increase in minority shareholders' loan and equity balance Proceeds from exercise...
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Page 23
...(56,624) 134,774
622,314
Share options exercises Acquistion of SEI- Shares issued from the escrow account Repurchase of ordinary shares Dividends paid Unrealized holding gains on quoted investments Deferred share compensation Net income
Balance at June 30, 1999
921
137
5,065
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5,202
102...
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Page 24
... rate for the S$ utilized in translating the balance sheet at June 30, 1999, expressed in US$ per one S$ was 0.5882.
Cash equivalents
Cash equivalents consist of highly liquid investment instruments with maturities of three months or less. All deposits are in short term deposit and money market...
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Page 25
... of securities at the time of purchase and reevaluates the classification at each reporting date. For non-quoted investments, management regularly reviews the assumptions underlying related sales, net income and cash flow forecasts and other factors used in assessing the carrying values of...
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Page 26
...value method prescribed in Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. Accordingly, compensation expense for stock option is measured as the excess, if any, of the market price of Creative's stock at the date of the grant...
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Page 27
... purchased using funds received from the exercise of stock options. Other than the dilutive effect of ordinary stock equivalents, Creative did not have any other financial instruments that would have an impact on the weighted average number of ordinary shares outstanding, used for computing diluted...
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Page 28
Notes to Consolidated Financial Statements
NOTE 3 - BALANCE SHEET DETAIL (in US$'000)
As of June 30 1999 Inventory: 1998
Raw materials Work in progress Finished products
Total inventory Estimated Useful Life Property and equipment:
$
95,290 18,406 34,332
148,028
$
89,383 17,058 37,879
144,320...
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Page 29
... Consolidated Financial Statements
NOTE 4 - LEASES AND COMMITMENTS
Creative leases the use of land and certain of its facilities and equipment are under non-cancelable operating lease arrangements. The land and facility leases expire at various dates through 2024 and provide for fixed rental rates...
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Page 30
... approved by the shareholders at the Annual General Meeting held on December 30, 1998. Dividends of approximately $45.0 million were paid on February 2, 1999 to shareholders of record as of January 18, 1999. Creative did not pay cash dividends on its ordinary shares in any previous fiscal years.
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Page 31
...years ending June 30, 2001, 2002, 2003, 2004 and 2005 by three percent of the issued share capital of Creative as at the last day of the immediate preceding financial year. The exercise price of options granted under the 1999 Scheme may be less than the fair market value of the shares as of the date...
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Page 32
... to Consolidated Financial Statements
NOTE 8 - STOCK OPTION PLANS (Cont'd)
A summary of Creative's stock option plans is presented below:
Options Outstanding Number of Shares ('000) Balance as of June 30, 1996 4,367 Weighted Average Exercise Price ($) 10.09
Granted Exercised Canceled Balance as of...
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Page 33
... summarizes option information for the employees' stock option plans (New Plan and 1999 Scheme) as at June 30, 1999.
Options Outstanding Weighted Average Remaining Range of Exercise Prices Number Outstanding ('000) Contractual Life (years) Weighted Average Exercise Price ($) Number Exercisable ('000...
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Page 34
...1, 1995.
NOTE 9 - INCOME TAXES
Creative was granted a Pioneer Certificate in 1990 under the Singapore Economic Expansion Incentives (Relief from Income Tax) Act, Cap. 86 for the design and manufacture of digital computer video, audio and multimedia products, including personal computers and related...
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Page 35
...the amount computed by applying the Singapore statutory rate of 26% to income before income taxes and minority interest, as follows (in US$'000):
Years ended June 30 1999 1998 1997
Income tax at Singapore statutory rate Tax exempt income Singapore Others Non-deductible expenses and write off Change...
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Page 36
...approximately $34.9 million at June 30, 1999, as a result of the exercise of employee stock options, the tax benefit of which has not been realized. The tax benefit of the deductions, when realized, will be accounted for as a credit to additional paid-in capital rather than a reduction of the income...
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Page 37
Notes to Consolidated Financial Statements
NOTE 10 - CREDIT FACILITIES AND LONG TERM OBLIGATIONS
On March 13, 1996, Creative Technology Centre Pte Ltd (CTC), a Singapore subsidiary of Creative, entered into an agreement with two banks for an eight year term loan facility for S$60.0 million ($35.3 ...
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Page 38
... expect there to be any consequent material adverse effect on its financial position or results of operation. During the course of their normal business operations, Creative and its subsidiaries are involved from time to time in a variety of intellectual property and other disputes, including claims...
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Page 39
... Creative paid $14.0 million from existing cash resources for all the assets of the NetMedia Division of OPTi Inc. and received warrants to purchase 200,000 shares of OPTi's common stock at a price of $10 per share. The NetMedia Division is in the business of research, development and sales of audio...
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Page 40
..., 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...
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Page 41
...to Consolidated Financial Statements
NOTE 15 - 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...
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Notes to Consolidated Financial Statements
NOTE 15 - SEGMENT REPORTING (Cont'd)
Years ended June 30 1999 Revenue by geographic region: 1998 1997
Singapore United States of America Ireland Rest of the world Consolidated
199,841 568,099 485,836 42,761 $ 1,296,537
$
222,382 612,842 366,294 32,690 ...
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Page 43
...the high and low sale prices of Creative's Ordinary Shares as reported by NASDAQ and SES for each quarter for the last three fiscal years. These prices do not include retail markups, markdowns, or commissions.
NASDAQ (Price in US$/Share) High Fiscal 1997 Low SES (Price in Singapore $/Share) High Low...
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Page 44
...Long 31 International Business Park Creative Resource Singapore 609921
US HEADQUARTERS
REGISTRAR / TRANSFER AGENT
1901 McCarthy Boulevard Milpitas CA 95035 USA Tel: 1-408-428-6600
Lim Associates Pte Ltd 10 Collyer Quay #19-08 Ocean Building Singapore 049315 & ChaseMellon Shareholder Services 235...
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The Creative Network
Worldwide Corporate Headquarters
Creative Technology Ltd 31 International Business Park, Creative Resource, Singapore 609921 Tel: +65-895 4000 Fax: +65-895 4999 Creative Zone at http://www.creaf.com
INSIDE ASIA
China Creative Future Computer Ltd Creative Park, No.165, Hai Dian...
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Page 46
... Blaster Live! Frontline Award Game Developers' Conference (USA) Jun 99
Sound Blaster Live! WinList Windows Magazine (USA) Mar 99
Sound Blaster Live! MVP Award PC Computing (China) Mar 99
Sound Blaster AWE64 Gold Best Buy PC Advisor (UK) Apr 99
Sound Blaster Live! Value Sound Card of the Year...