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5
CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
Expenses
Total expenses decreased from US$128.0 million in FY2011 to US$86.2 million in FY2012.
Selling, general and administrave expenses were US$46.5 million compared to US$61.5 million in FY2011. The decrease in
selling, general and administrave expenses was due mainly to a reducon in sales and a result of the cost cung acons taken
in FY2011.
Research and development expenses in FY2012 were US$39.6 million compared to US$66.4 million in FY2011. The decrease in
research and development expenses was mainly a result of cost cung acons taken in FY2011. Going forward, the Group will
connue to invest in product research and development in areas that are strategic to the Group, cung back spending only in
product areas that are not strategic to the Group.
Net Loss
Net loss in FY2012 was US$83.9 million compared to US$47.1 million in FY2011. Sales in FY2012 have decreased and gross prot
was lower by US$12.3 million compared to FY2011, but operang results for the Group in FY2012 have improved due to a decrease
in operang expenses by US$41.8 million compared to FY2011 as a result of the cost cung acons taken in FY2011. Despite
the improvement in operang results, the Group’s results in FY2012 were negavely impacted by other losses (net) of US$32.5
million, compared to other gains (net) of US$27.5 million in FY2011.
Other losses (net) of US$32.5 million in FY2012 comprised US$3.6 million impairment loss on unulised building facilies, US$3.3
million impairment loss on intangible assets, US$14.7 million impairment loss on property and equipment, US$6.5 million provisions
for commitments for other expenditures and obligaons by a subsidiary, QMax Communicaons Pte Ltd (“QMax”), for its wireless
broadband project in Singapore, US$8.1 million currency translaon loss, and US$3.4 million impairment loss on investments,
oset parally by US$7.1 million net gain on disposal of investments.
Impairment loss on investments was due to adverse business condions in certain investee companies. Impairment loss on unulised
building facilies of US$3.6 million was a charge taken for the commied rental and related costs of unulised space in the Group’s
headquarters building in Singapore arising from the restructuring exercise and headcount reducon in FY2011. Impairment loss
on intangible assets of US$3.3 million relates to US$2.3 million goodwill impairment charge and US$1.1 million trademark and
licenses impairment charge by QMax for its wireless broadband project. Impairment loss on property and equipment of US$14.7
million relates to US$12.2 impairment charge by QMax for its wireless broadband project and a US$2.5 million impairment charge
on a building owned by a subsidiary in Ireland to write down the book value to its esmated net realisable value. Other gains
(net) of US$27.5 million in FY2011 included a US$25.3 million currency translaon gain.
The QMax wireless broadband project has been suspended as the vendor for the equipment has failed to deliver on the key
network performance requirements set out in the relevant supply contract. The Company and QMax have given noce to the
vendor to terminate or rescind the supply contract on the grounds of material breach of the contract and/or misrepresentaons
by the vendor. The Company and QMax have also iniated legal proceedings against the vendor to recover damages and all losses
suered in relaon to the wireless broadband project. Pending the outcome of the legal proceedings, full provisions have been
made for the impairment of equipment and related intangible assets for the project, as well as provisions for commitments for
other expenditures and obligaons to third pares relang to the project.
The Group’s income tax expense was US$0.3 million in FY2012 compared to a credit of US$4.8 million in FY2011. The Group’s
income tax credit of US$4.8 million in FY2011 was due mainly to a US$3.3 million write back of deferred tax liability and a US$1.7
million write back of tax provisions. Deferred tax liability of US$3.0 million was previously provided for the tax exposure of a
subsidiary company. The amount was wrien back in FY2011 as the Group had disposed the subsidiary company in FY2011 and
is no longer liable to its tax exposure. Tax provision of US$2.0 million pertaining to open years of assessment were nalised and
wrien back by the Company in FY2011.