Creative 2005 Annual Report Download
Download and view the complete annual report
Please find the complete 2005 Creative annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1 -
2 -
3 -
4 -
5 -
6 -
7 -
8 -
9 -
10 -
11 -
12 -
13
-
14
-
15
-
16
-
17
-
18
-
19
-
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
 |
 |
TABLE OF CONTENTS
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 19
Consolidated Balance Sheets 20
Consolidated Statements of Operations 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Shareholders’ Equity 24
Notes to Consolidated Financial Statements 25
Stock Market Information 41
The Creative Network 42
Corporate Directory 44
1
Table of contents
-
Page 1
... of Operations 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 The Creative Network Corporate... -
Page 2
... to leverage our leadership in audio technology to improve our competitive position in the MP3 digital audio market. We achieved a new milestone in our research and development efforts in August 2005 when our innovation in portable media players was recognized with the award of a U.S. patent for the... -
Page 3
... head, listening to headphones will result in a whole new experience. New products for MP3 digital audio players cover products in all segments of the market: players using flash memory, 1.0-inch microdrives and 1.8-inch hard drives, and players for music, photo and video. The line-up of MP3 players... -
Page 4
... audited financial statements which is not included in this annual report. CONSOLIDATED STATEMENTS OF OPERATIONS DATA (US$'000, EXCEPT PER SHARE DATA): For the years ended June 30 2005 Sales, net (2) Cost of goods sold Gross profit Operating expenses: Selling, general and administrative (2) Research... -
Page 5
... Financial Statements," Creative was granted a new Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Under the new Pioneer Certificate, profits arising from qualifying activities will be exempted from income tax in Singapore, subject to certain conditions... -
Page 6
... result of poor economic conditions, social and political turmoil or major health concerns; the proliferation of sound functionality in new products from competitors at the application software, chip and operating system levels; the deterioration of global equity markets; Creative's reliance on sole... -
Page 7
... accounts, returns and discounts based on credit profiles of its customers, current economic trends, contractual terms and conditions and historical payment, return and discount experience. Management performs ongoing credit evaluations of customers' financial condition and uses letters of credit... -
Page 8
... and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. VALUATION OF GOODWILL AND OTHER INTANGIBLE ASSETS Creative uses the purchase method of accounting for business combinations, in line with Financial Accounting Standards Board... -
Page 9
... treatment of items, such as reserves and accruals for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within Creative's consolidated balance sheet. Significant management judgement is required in determining the provision for income... -
Page 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected statement of operations data as a percentage of sales: Years ended June 30 2005 Sales, net Cost of goods sold Gross profit ... -
Page 11
... of low-end audio products, which have been negatively impacted by sales of integrated motherboard audio solutions in value PCs. Creative believes that the introduction of its Xtreme Fidelity audio technology and Sound Blaster X-Fi sound cards will set a new standard for audio in music, movies and... -
Page 12
...part of its long-term business strategy, from time to time, Creative makes strategic equity investments in companies that can provide Creative with technologies or products that management believes will give Creative a competitive advantage in the markets in which Creative competes. Net interest Net... -
Page 13
...of sales compared to 18% in fiscal year 2003. In fiscal year 2004, Creative launched a number of new digital audio players and expanded its existing MuVo family of flash players and Zen family of hard drive players which helped the company to strengthen its market share in digital audio players. The... -
Page 14
... for income taxes Creative was granted a new Pioneer Certificate under the International Headquarters Award that will expire in March 2010. Under the new Pioneer Certificate, profits arising from qualifying activities will be exempted from income tax in Singapore, subject to certain conditions. As... -
Page 15
... to be achieved in future quarters. Unaudited data for quarters ended (in US$'000 except per share data) Jun 30 2005 Sales, net Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development Other charges Operating (loss) income Net gain (loss) from... -
Page 16
... OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unaudited data for quarters ended (as a percentage of sales) Jun 30 2005 Sales, net Cost of goods sold Gross profit Operating Expenses: Selling, general and administrative Research and development Impairment of goodwill/ intangible assets Operating... -
Page 17
..., letters of credit and fixed short-term loans, of which approximately $111.9 million were unutilized. As part of its long-term business strategy, from time to time, Creative makes strategic equity investments in companies that can provide Creative with technologies or products that management... -
Page 18
...'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Current and Expected Liquidity (Cont'd) Management believes that Creative has adequate resources to meet its projected working capital and other cash needs for at least the next twelve months. To date, inflation has not had... -
Page 19
... respects, the financial position of Creative Technology Ltd. and its subsidiaries at June 30, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2005 in conformity with accounting principles generally accepted in the... -
Page 20
... BALANCE SHEETS (In US$'000, except per share data) June 30 2005 ASSETS Current assets: Cash and cash equivalents Accounts receivable, less allowances of $21,288 and $20,700 Inventory Other assets and prepaids Total current assets Property and equipment, net Investments Other non-current assets... -
Page 21
CONSOLIDATED STATEMENTS OF OPERATIONS (In US$'000, except per share data) Years ended June 30 2005 Sales, net Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development Other charges Operating (loss) income Gain (loss) from investments, net ... -
Page 22
...: Accounts receivable Inventory Marketable securities Other assets and prepaids Accounts payable Accrued and other liabilities Income taxes Net cash (used in) provided by operating activities Cash flows from investing activities: Capital expenditures, net Proceeds from sale of fixed assets Proceeds... -
Page 23
... (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosure of cash flow information: Interest paid Income taxes paid, net Non cash transaction: Fixed assets acquired under capital lease $ (23,831... -
Page 24
... STATEMENTS OF SHAREHOLDERS' EQUITY (In US$'000, except share data) Ordinary Shares ('000) Balance at June 30, 2002 Shares issued under employee options and share purchase plans Dividends paid Reversal of unvested deferred share compensation, net Amortization of deferred share compensation... -
Page 25
...also approximate fair value because current interest rates charged to Creative for debts of similar maturities are substantially the same. Inventory Inventory is stated at the lower of cost or market. Cost is determined using standard cost, appropriately adjusted at balance sheet date to approximate... -
Page 26
..., product lifecycle and product development plans, quality issues, and current inventory levels. Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets... -
Page 27
...measures any impairment based on a combination of market comparable method, and projected discounted cash flow method using a discount rate determined by the management to commensurate with the risk inherent in Creative's current business model. Product warranties The warranty period for the bulk of... -
Page 28
... based on credit profiles of its customers, current economic trends, contractual terms and conditions and historical payment, return and discount experience. Stock-based compensation Creative accounts for stock-based employee compensation in accordance with Accounting Principles Board Opinion ("APB... -
Page 29
... 3 - BALANCE SHEET DETAIL (in US$'000) As of June 30 2005 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, fixtures and office equipments Leasehold... -
Page 30
... review. The fair value was determined based on a combination of the projected discounted cash flow method, and market comparable method whereby the market multiples of 3Dlabs were compared to the market multiples of other publicly traded companies in similar lines of business. The conclusion of... -
Page 31
... (in cash or in kind) during the period Balance at the end of the year $ 6,232 27,603 (176) (21,241) 12,418 $ 2,835 8,417 (149) (4,871) 6,232 $ $ NOTE 5 - LEASES AND COMMITMENTS Creative leases the use of land and certain of its facilities and equipment under non-cancelable operating lease... -
Page 32
... by Creative since the commencement date of the program on November 6, 1998 are set out below: Number of Shares Repurchased (in millions) Fiscal year 1999 to fiscal year 2003 Fiscal year 2004 Fiscal year 2005 Total 26.3 - - 26.3 Average Price (US$) $ 13 - - $ 13 At the Annual General Meeting... -
Page 33
...under Creative's Employee Share Purchase Plan in fiscal year 2005. Creative Employee Stock Option Plans Creative Technology (1999) Share Option Scheme ("1999 Scheme") was approved by the shareholders on December 30, 1998. The 1999 Scheme allows options to be granted to full-time employees as well as... -
Page 34
... OPTION PLANS (Cont'd) Creative Employee Stock Option Plans A summary of options granted to employees and non-employee directors under Creative's stock option plans is presented below: Options Outstanding Number of Shares ('000) Balance as of June 30, 2002 Granted - at fair market value Exercised... -
Page 35
...the Creative employee share purchase plan and stock option plan is estimated at the date of the grant using the Black-Scholes model based on the following assumptions: Fiscal year 2005 Volatility Risk-free interest rates Share purchase plan Stock options Dividend yield Expected lives: Share purchase... -
Page 36
... FINANCIAL STATEMENTS NOTE 10 - 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... -
Page 37
...the deductions, when realized will be accounted for as a credit to additional paid-in capital rather than a reduction of the income tax provision. NOTE 11 - DEBT OBLIGATIONS In November 2004, Creative signed a five-year $175.0 million syndicated term loan facility with a group of international banks... -
Page 38
... to be any consequent material adverse effect on its financial position or results of operations. NOTE 14 - INVESTMENTS IN ASSOCIATED COMPANY In August 2003, SigmaTel, an equity-method investee of Creative, completed an initial public offering of its common stock in the United States. As a result... -
Page 39
...189,000 in fiscal year 2005. NOTE 17 - SEGMENT REPORTING Creative operates primarily in one industry segment and provides advanced multimedia solutions for personal computers and personal digital entertainment products. Creative has manufacturing plants and distribution centers in Malaysia and China... -
Page 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17 - SEGMENT REPORTING (Cont'd) Years ended June 30 2005 Operating income (loss): Asia Pacific The Americas Europe Consolidated $ $ (77,026) 2,397 6,081 (68,548) $ $ 33,106 (171) 11,313 44,248 $ $ 25,353 (10,744) 12,594 27,203 2004 2003 As ... -
Page 41
.... Creative will keep shareholders informed in the event that the company decides to resume such plans. 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... -
Page 42
THE CREATIVE NETWORK Worldwide Corporate Headquarters Creative Technology Ltd. 31 International Business Park, Creative Resource, Singapore 609921 Tel: +65-6895 4000 Fax: +65-6895 4999 Website: www.creative.com US Headquarters Creative Labs, Inc. 1901 McCarthy Boulevard, Milpitas, CA 95035 Tel: +1-... -
Page 43
... Sant Just Desvern, Barcelona, Spain Tel: +34-93-470 3150 Fax: +34-93-499 0811 Sweden Creative Technologies Scandinavia AB Spånga Center, Stormbyvägen 2-4, 163 29 Spånga, Sweden Tel: +46-8-564 72020 Fax: +46-8-795 7835 United Kingdom Creative Labs (UK) Ltd Unit 3, The Pavilions Ruscombe Business... -
Page 44
... International Business Park Creative Resource Singapore 609921 US HEADQUARTERS 1901 McCarthy Boulevard Milpitas CA 95035 USA Tel: 1-408-428-6600 REGISTRAR/TRANSFER AGENT Lim Associates Pte Ltd 10 Collyer Quay #19-08 Ocean Building Singapore 049315 & Mellon Investor Services 525 Market Street Suit...