Creative Announces Q4 FY06 Financial Results

Creative Announces Q4 FY06 Financial Results

SINGAPORE, Aug. 9 /PRNewswire-FirstCall/ -- Creative Technology Ltd. (NASDAQ:CREAF), a worldwide leader in digital entertainment products, today announced financial results for the fourth quarter of fiscal year 2006 and for the full fiscal year 2006, ended June 30, 2006. All financial results are stated in U.S. dollars.

Sales for the fourth quarter were $230.9 million, compared to sales of $305.4 million for the same quarter last year. Sales for the 2006 fiscal year were $1.1 billion, compared to $1.2 billion for the previous fiscal year.

Net loss for the fourth quarter was $12.7 million with a loss per share of $0.15, including a $10 million tax credit. This compares to a net loss of $31.9 million with a loss per share of $0.38 for the same quarter last year including an investment gain of $9.3 million. Excluding the investment gain, net loss for the same period last year was $41.2 million with a loss per share of $0.49.

Net loss for the 2006 fiscal year was $118.2 million, with loss per share of $1.42, including investment gains of $18.9 million and one-time charges of $41.6 million primarily related to goodwill and restructuring charges for 3Dlabs. Excluding the investment gains and one-time charges, net loss for the 2006 fiscal year was $95.4 million, with loss per share of $1.15. This compares to net income of $0.6 million with EPS of $0.01 for the previous fiscal year, including a non-cash impairment charge of $65.2 million and investment gains of $74.4 million. Excluding the non-cash impairment charge and investment gain, net loss for the previous fiscal year was $8.6 million with a loss per share of $0.10.

"During the fourth quarter, although we posted a loss for the period and for the year, we made progress towards our goals," said Craig McHugh, president of Creative Labs, Inc. "We reduced our operating expenses by 17 percent from the previous quarter. We further reduced our net inventory level in the period, with a 15 percent decrease from the previous quarter. In addition, we launched the ZEN V, and the ZEN V Plus MP3, photo and video player in the period. Based on our progress in the fourth quarter, our focus on reducing our operating expenses, and the market potential for our products, we are targeting our return to profitability by the end of this calendar year and continued profitability going forward."

Recent Announcements

During the quarter, Creative introduced several exciting new products, including the ZEN V PLUS, ZEN V, ZEN Aurvana, and the Live!(R) Cam Voice. For more information visit www.creative.com.

Awards & Accolades
-- The Creative ZEN V Plus received the "Editor's Choice" award from
CNET.com.
-- The Creative ZEN Vision:M won the "World Class" award from PC World
magazine.
-- The Creative ZEN Nano Plus won the "Best Buy" award from PC World
magazine.
-- The Creative Sound Blaster(R) X-Fi(TM) won the "World Class" award from
PC World magazine.

Listen to Creative's Q4 FY06 Analyst Conference Call:

Link to the Q4 earnings conference call live on August 10 at 8:00AM Singapore

time (August 9 at 8:00PM Eastern time) via Creative's Investor Relations Web

site: http://us.creative.com/corporate/investor/

or by calling 1-800-374-2493.

A replay will be available from shortly after the end of the conference call

until August 16th via the same link from the IR web site or by calling 1-800-642-1687 or 1-706-

645-9291. The reservation number to listen to call is 4238976.

About Creative

Creative is a worldwide leader in digital entertainment products. Famous for its Sound Blaster audio cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed ZEN portable audio and media players. Creative's innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment -- anytime, anywhere.

This announcement refers to products and pricing sold in the United States of America. Pricing and product availability are subject to change without notice. Sound Blaster, Live!, and Zen are trademarks or registered trademarks of Creative Technology Ltd. in the United States and/or other countries. All other brand and product names are trademarks of their respective holder and are hereby recognized as such.

Safe Harbor for Forward-Looking Statements:

This press release contains forward-looking statements including statements relating to Creative's plan to reduce its operating expenses, return to profitability and market potential for its products. These forward- looking statements involve risks and uncertainties that could cause Creative's actual results to differ materially. Such risks and uncertainties include: Creative's ability to timely develop new products that gain market acceptance and to manage frequent product transitions; competitive pressures in the marketplace; a reduction or cancellation of sales orders for Creative products; accelerated declines in the average selling prices of Creative's products or any prices of components; Creative's ability to successfully integrate acquisitions; potential fluctuations in quarterly results due to the seasonality of Creative's business and the difficulty of projecting such fluctuations; possible disruption in commercial activities caused by factors outside of Creative's control, such as terrorism, armed conflict and labor disputes; a reduction in demand for computer systems, peripherals and related consumer products as a result of poor economic conditions, social and political turmoil; 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; exposure to excess and obsolete inventory; Creative's reliance on sole sources for many of its chips and other key components; component shortages which may impact Creative's ability to meet customer demand; Creative's ability to protect its proprietary rights; Creative's ability to successfully manage its expanding operations; the vulnerability of certain markets to current and future currency fluctuations; the effects of restricted fuel availability and rising costs of fuel; fluctuations in the value and liquidity of Creative's investee companies; and the potential decrease in trading volume and value of Creative's Ordinary Shares as a result of the Flow Back Restriction that commenced on June 1, 2003 and Creative's previous plan and any future plans to delist from NASDAQ and to eliminate its U.S. reporting obligations. For further information regarding the risks and uncertainties associated with Creative's business, please refer to its filings with the SEC, including its Form 20-F for fiscal 2005 filed with the SEC. Creative undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in Creative's expectations.

CREATIVE TECHNOLOGY LTD.
CONSOLIDATED BALANCE SHEETS
(In US$' 000)

(Unaudited)
June 30, June 30,
2006 2005
ASSETS

Current Assets:
Cash and cash equivalents $213,995 $187,246
Accounts receivable, net 133,002 163,184
Inventory 234,942 395,886
Other assets and prepaids 53,248 43,144

Total current assets 635,187 789,460

Property and equipment, net 109,174 117,187
Investments 74,581 125,914
Other non-current assets 11,671 44,913

Total Assets $830,613 $1,077,474

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Accounts payable $104,923 $151,070
Accrued liabilities 100,690 103,768
Income taxes payable 18,930 20,712
Current portion of long term obligations
and others 4,737 7,383

Total current liabilities 229,280 282,933

Long term obligations 206,593 209,455
Minority interest in subsidiaries 1,587 3,954
Shareholders' equity 393,153 581,132

Total Liabilities and Shareholders' Equity $830,613 $1,077,474

CREATIVE TECHNOLOGY LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$' 000, except per share data)
(Unaudited)

Three months ended Twelve months ended
June 30, June 30,
2006 2005 2006 2005

Sales, net $230,875 $305,409 $1,127,531 $1,224,411

Cost of goods sold 198,371 274,417 963,217 949,151

Gross profit 32,504 30,992 164,314 275,260

Operating expenses:

Selling, general and
administrative 42,753 48,051 195,197 196,258

Research and
development 15,682 20,300 77,186 82,325

Other charges -- -- 37,351 65,225

Total operating
expenses 58,435 68,351 309,734 343,808

Operating loss (25,931) (37,359) (145,420) (68,548)

(Loss) gain from
investments, net (34) 9,304 18,904 74,405

Interest income 2,000 967 6,241 3,571

Interest expense (2,701) (1,792) (9,411) (3,674)

Others 6,072 (4,796) 3,572 (4,260)

(Loss) income before
income taxes and
minority interest (20,594) (33,676) (126,114) 1,494

Provision for income
taxes 7,632 1,855 7,150 (969)

Minority interest
in loss (income) 230 (123) 805 63

Net (loss) income $(12,732) $(31,944) $(118,159) $588

Basic (loss) earnings
per share: $(0.15) $(0.38) $(1.42) $0.01

Weighted average
ordinary shares
outstanding ('000) 83,179 83,576 83,093 82,661

Diluted (loss) earnings
per share: $(0.15) $(0.38) $(1.42) $0.01

Weighted average
ordinary shares 83,179 83,576 83,093 85,333
and equivalents
outstanding ('000)

CREATIVE TECHNOLOGY LTD.
SUPPLEMENTAL FINANCIAL INFORMATION

Three months ended
June 30, March 31, June 30,
2006 2006 2005

Revenue by geographical region :
Americas 46% 41% 41%
Europe 37% 38% 39%
Asia and rest of the world 17% 21% 20%

Revenue by product category :
Personal Digital Entertainment 65% 60% 68%
Audio 13% 13% 11%
Speakers 13% 17% 13%
Others 9% 10% 8%

Source: Creative Labs, Inc.

CONTACT: USA, Phil O'Shaughnessy, +1-408-546-6773, or
poshaughnessy@creative.com, or Asia, Wynne Leong, +65-6895-4120, or
wynne.leong@ctl.creative.com, both of Creative Technology Ltd.

Web site: http://www.creative.com/

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