Creative 2001 Annual Report Download

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Chairman’s Message 2
Selected Consolidated Financial Data 4
Management’s Discussion and Analysis of
Financial Condition and Results of Operations 6
Report of Independent Accountants 13
Consolidated Balance Sheets 14
Consolidated Statements of Operations 15
Consolidated Statements of Cash Flows 16
Consolidated Statements of Shareholders’ Equity 17
Notes to Consolidated Financial Statements 18
Stock Market Information 38
Corporate Directory 39
The Creative Network 40
C O N T E N T S

Table of contents

  • Page 1
    ... Report of Independent Accountants Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity Notes to Consolidated Financial Statements Stock Market Information Corporate Directory The Creative Network...

  • Page 2
    ... position in the digital entertainment market. We have also expanded our product offerings, especially in the three core audio categories: sound cards, speakers and PDE. In the sound card category, Creative launched the 7th generation Sound Blaster® cards - the Sound Blaster Live!™ 5.1 line...

  • Page 3
    ... to enable our customers to enjoy the kind of audio experience associated with high-end speaker systems. In the PDE category, fiscal 2001 saw the launch of the NOMAD Jukebox portable digital audio player, which enjoyed a phenomenal press reception and received much highly acclaimed reviews from the...

  • Page 4
    ... included elsewhere in this Annual Report. CONSOLIDATED STATEMENTS OF OPERATIONS DATA (US$'000, EXCEPT PER SHARE DATA): For the years ended June 30 2001 Sales, net Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development Restructuring and other...

  • Page 5
    ...and $0.40 per share, for fiscal 2001, 2000, 1999, 1998 and 1997 respectively. The corporate income tax rate in Singapore, which would otherwise be applicable, would have been 24.5% for fiscal year 2001, 25.5% for fiscal year 2000, and 26% for fiscal years 1997 to 1999. Creative's Pioneer Certificate...

  • Page 6
    ... at the application software, chip and operating system levels; reductions in the market value of products sold by Creative, including increases in inventory or declines in demand or prices for storage devices, digital entertainment appliances, board and chip-level products, software, speakers, and...

  • Page 7
    ...% 73 27 Creative's net sales, by product category, for the past three fiscal years were as follows: Percentage of Net Sales for fiscal years ended June 30 2001 Audio products Speakers Multimedia Upgrade Kits Graphic & Video products Personal Digital Entertainment Communication/ Other products 41 12...

  • Page 8
    ... Audio product sales (Sound Blaster audio cards and chipsets) for fiscal year 2001 decreased marginally by 2% compared to fiscal year 2000 primarily due to weaker demand in the system integrator and original equipment manufacturer ("OEM") channels. As a percentage of total sales, audio product sales...

  • Page 9
    ... attributable to component shortages for the high-end 3D Blaster products, and the phase out of low-end graphics and video cards. The decline in sales of video and graphics products was offset in part by an increase in sales of digital cameras. Sales of speakers increased by 65% and represented 11...

  • Page 10
    ...of the results to be achieved in future quarters. Unaudited data for quarters ended (in US$'000 except per share data) Jun 30 2001 Sales, net Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development Restructuring and other charges (1) Operating...

  • Page 11
    ... Unaudited data for quarters ended (as a percentage of sales) Jun 30 2001 Sales, net Cost of goods sold Gross profit Operating Expenses: Selling, general and administrative Research and development Restructuring and other charges (1) Operating income (loss) Net (loss) gain from investments Interest...

  • Page 12
    ... dividend payment (See Note 7 of "Notes to Consolidated Financial Statements"), and $5.7 million to repay long-term obligations and minority shareholders' loan and equity balance. The cash used in financing activities was offset partially by cash generated from exercises of Creative's stock options...

  • Page 13
    ...' equity present fairly, in all material respects, the financial position of Creative Technology Ltd. and its subsidiaries at June 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2001 in conformity with accounting...

  • Page 14
    ... BALANCE SHEETS (In US$'000, except per share data) June 30 2001 ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable, less allowances of $25,221 and $37,197 Inventory Other assets and prepaids Total current assets Property and equipment, net Investments...

  • Page 15
    ...$'000, except per share data) Years ended June 30 2001 Sales, net Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development Restructuring and other charges (Notes 13 and 14) Operating income (Loss) gain from investments, net Interest income and...

  • Page 16
    ... sale of quoted investments Purchase of investments (Increase) decrease in other non current assets, net Net cash used in investing activities Cash flows from financing activities: Increase (decrease) in minority shareholders' loan and equity balance Net proceeds from issuance of preference shares...

  • Page 17
    ... data) Ordinary Shares ('000) Balance at June 30, 1998 Share option exercise Acquistion of SEI - Shares issued from the escrow account Repurchase of ordinary shares Dividends paid Deferred share compensation Comprehensive income Balance at June 30, 1999 Shares issued under employee options and share...

  • Page 18
    ... the balance sheet at June 30, 2001, expressed in US$ per one S$ and Euro was 0.5490 and 0.8469, respectively. 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 accounts...

  • Page 19
    ... balance sheet date. The resulting net unrealized gains or losses on marketable securities are included in earnings in the period they are incurred. Fair value of financial instruments For certain of Creative's financial instruments, including cash equivalents, accounts receivable, accounts payable...

  • Page 20
    ... acquired, liabilities assumed and in-process technology based on their estimated fair market values at the dates of acquisition. Amortization is computed using the straight-line method over the estimated useful lives of the assets, ranging from one to seven years. Creative regularly reviews the net...

  • Page 21
    ...143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 will be adopted for Creative's fiscal year beginning July 1, 2002...

  • Page 22
    ...periods, the ordinary equivalent shares to be purchased using proceeds received from the exercise of such equivalent shares. Other than the dilutive effect of stock options, there are no other financial instruments that would impact the weighted average number of ordinary shares outstanding used for...

  • Page 23
    ... 2000 Inventory: Raw materials Work in progress Finished products Total inventory Estimated Useful Life Property and equipment: Land and buildings Construction in progress Machinery and equipment Furniture and fixtures Leasehold improvements 25 years - 3 - 6 years 3 - 8 years Term of lease $ 83,203...

  • Page 24
    ... at various dates through 2024 and provide for fixed rental rates during the terms of the leases. Minimum future lease payments for non-cancelable leases as of June 30, 2001, were as follows (in US$'000): Operating Leases Fiscal years ended June 30, 2002 2003 2004 2005 2006 Thereafter Total minimum...

  • Page 25
    ...: Years ended June 30, Number of Shares Repurchased (in millions) 10.0 5.9 7.7 23.6 Average Price (US$) $ 14 $ 17 $ 12 $ 14 1999 2000 2001 Total At the 2000 Annual General Meeting ("AGM") held on November 8, 2000, the shareholders approved the share repurchase mandate allowing Creative to buy up...

  • Page 26
    ... stock options (ISO's) to be granted to employees of Creative on a quarterly basis, at the average market price established on the five days closing immediately prior to the date of grant. The options vested at the rate of 25% at the end of each anniversary of the grant date and were exercisable...

  • Page 27
    ... the 1999 Scheme in fiscal 2001. Effective April 2000, unvested stock options to purchase 0.2 million shares of Creative's ordinary stock granted under the New Plan and 1999 Scheme to employees of a subsidiary were canceled in exchange for the right to receive options granted by the subsidiary. The...

  • Page 28
    ... options under Creative's employee stock option plans The following table summarizes option information for Creative's employee stock option plans (New Plan and 1999 Scheme) as at June 30, 2001. Options Outstanding Weighted Average Remaining Weighted Contractual Average Life Exercise Price (years...

  • Page 29
    ... canceled Balance as of June 30, 2001 3,841 899 (2,540) 2,200 1.98 2.45 1.80 2.39 The following table summarizes option information for the subsidiary employee stock option plan as at June 30, 2001: Range of Exercise Price Weighted Average Remaining Contractual Life (years) 7.97 8.55 8.51 Number...

  • Page 30
    ... purchase rights under the Creative employee share purchase plan and stock option plan is estimated using the Black-Scholes model based on the following assumptions: Fiscal 2001 Volatility Risk-free interest rates Share purchase plan Stock options Dividend yield Expected lives: Share purchase plan...

  • Page 31
    ... (Cont'd) Had compensation cost for Creative's employee share purchase and stock option plans, and the subsidiary's stock option plan been determined based on the fair value at the grant dates using the Black-Scholes model, Creative's net income (loss) and net income (loss) per share would have been...

  • Page 32
    ... 1999 to income before income taxes and minority interest, as follows (in US$'000): Years ended June 30 2001 2000 1999 Income tax (benefit) at Singapore statutory rate Tax exempt income Singapore Others Non-deductible expenses and write offs Change in valuation allowances Rate differences and others...

  • Page 33
    ..., 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 ($32.9 million) to finance the construction of Creative's headquarters building in Singapore. The loan is repayable...

  • Page 34
    ... outstanding shares of the subsidiary on a fully converted basis. NOTE 12 - LICENSE AGREEMENTS Creative has entered into license agreements with certain software developers under which it has the right to include, modify and distribute software products in support of its sales. Typically, royalties...

  • Page 35
    ... the fair market value of Creative stock on the settlement date. Creative recorded as a pre-tax charge of $20.0 million against fiscal 2000 earnings as a result of the settlement of outstanding litigation. NOTE 15 - INVESTMENTS Resulting from a continued downturn in global equity markets, Creative...

  • Page 36
    ... 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 2000 $ 274,101 598,956 470,547 $ 2001 External net...

  • Page 37
    ... on the physical location of the assets at the end of each of the fiscal years. Geographic revenue information for the three years ended June 30, 2001 is based on the location of the selling entity. As of June 30 2001 2000 Identifiable assets: Singapore United States of America Ireland Rest of the...

  • Page 38
    ..."CREAF". Creative's Ordinary Shares have been traded on the SGX-ST since June 15, 1994. The following table presents, for the registered shares on the NASDAQ and SGX-ST: (i) the annual high and low market prices for the five most recent full fiscal years; (ii) the high and low market prices for each...

  • Page 39
    .../TRANSFER AGENT Lim Associates Pte Ltd 10 Collyer Quay #19-08 Ocean Building Singapore 049315 & ChaseMellon Shareholder Services 235 Montgomery Street 23rd Floor San Francisco CA 94104 USA EUROPE HEADQUARTERS Ballycoolin Industrial Estate Blanchardstown, Dublin 15 Republic of Ireland Tel: 353-1-820...

  • Page 40
    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 Website: www.creative.com INSIDE ASIA Singapore Broadxent Pte Ltd 31 International Business Park, #05-09, Creative ...