Creative 2005 Annual Report Download - page 17

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Net cash used in operating activities during fiscal year 2004 was $20.7 million compared with net cash generated of $99.7
million in fiscal year 2003. The cash used in operating activities of $20.7 million was mainly due to adjustments for non-
cash items of $41.5 million, a $42.2 million increase in accounts receivable and other assets and prepaid expenses and a
$103.5 million net increase in inventory in response to the anticipated strong year over year growth in demand, especially
for PDE products, and to support the launch of new products for the holiday season. Cash used in operating activities was
offset partially by a net increase of $41.7 million in accounts payable and accrued and other liabilities. The $41.5 million
in adjustments to non-cash items include $25.9 million of depreciation and amortization, a $52.9 million gain from the
disposal of investments and interests in an associated company, and a non-cash gain of $23.1 million arising from the
deemed disposal of interests in an associated company, (see Note 14 of “Notes to Consolidated Financial Statements”).
Investing Activities
Net cash provided by investing activities during fiscal year 2005 was $42.5 million compared with $24.1 million in fiscal year
2004. The $42.5 million cash provided in fiscal year 2005 mainly comprised proceeds from the sale of investments
amounting to $98.1 million, offset partially by net capital expenditures of $34.2 million and the purchase of investments
amounting to $17.8 million.
Net cash provided by investing activities during fiscal year 2004 was $24.1 million compared with cash used of $12.3 million
in fiscal year 2003. The $24.1 million cash provided in fiscal year 2004 mainly comprised proceeds from the sale of
investments and interests in an associated company amounting to $69.1 million, offset partially by net capital expenditures
of $15.6 million, the purchase of investments amounting to $11.7 million, and a net increase in other non current assets of
$17.6 million, relating mainly to the costs of new technologies acquired and additional investments in associated companies.
Financing Activities
Net cash provided by financing activities during fiscal year 2005 was $142.2 million compared with cash used of $24.3
million in fiscal year 2004. Cash provided by financing activities of $142.2 million primarily consisted of $175.0 million in
proceeds from the draw-down of a five year $175.0 million syndicated term loan facility with a group of international banks
and proceeds from the exercise of ordinary share options amounting to $14.8 million, offset partially by dividend payment
of $41.4 million (see Note 8 of “Notes to Consolidated Financial Statements”) to shareholders.
During fiscal year 2004, $24.3 million was used for financing activities compared with $22.3 million in fiscal year 2003. Cash
used for financing activities primarily consisted of $20.2 million for a dividend payment (see Note 8 of “Notes to Consolidated
Financial Statements”) to shareholders and $11.6 million for the repayment of debt obligations, which includes a $9.0 million
prepayment of principal and accrued interest by 3Dlabs for a subordinated convertible note issued to an investor. Cash used
in financing activities was offset partially by $9.4 million in proceeds from the exercise of share options.
Current and Expected Liquidity
In November 2004, Creative signed a five-year $175.0 million syndicated term loan facility with a group of international banks.
The proceeds from this facility were used primarily to fund the growth in working capital requirements arising from the
growth in the company’s revenue. In fiscal year 2005, Creative drew down on the entire $175.0 million from this loan facility.
As of June 30, 2005, in addition to its cash reserves and excluding long term loans, Creative has credit facilities totaling
$113.9 million for overdrafts, guarantees, 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 believes will give Creative a competitive advantage in
the markets in which Creative competes.