FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR AUGUST 12, 2002
DESWELL INDUSTRIES, INC.
(Registrant's name in English)
Unit 516 517, Hong Leong Industrial Complex,
No. 4 Wang Kwong Road, Kowloon Bay,
Kowloon, Hong Kong
(Address of principal executive offices)
DESWELL [LOGO]
CONTACT:
John G. Nesbett
Ryan Daniels
Lippert/Heilshorn & Associates
212-838-3777, ext. 6631
DESWELL INDUSTRIES, INC.
ANNOUNCES 10% INCREASE IN FIRST QUARTER NET INCOME
-COMPANY ALSO ANNOUNCES FIRST QUARTER DIVIDEND OF $0.19 PER SHARE-
HONG KONG (August 12, 2002) - Deswell Industries, Inc. (Nasdaq: DSWL), today
announced its results for the first quarter ended June 30, 2002.
Net sales for the quarter ended June 30, 2002, were $23.3 million, an increase
of 7% compared to net sales of $21.9 million for the quarter ended June 30,
2001. Operating income decreased 11% to $3.5 million, compared to $4.0 million
for the same quarter in 2001. Net income for the quarter increased 10% to $3.7
million compared to $3.4 million for the year-ago quarter.
The Company has announced a 3-for-2 stock split of record date July 8, 2002,
payable on July 22, 2002. The stock split has increased the number of total
shares outstanding from approximately 5.7 million shares to 8.5 million shares.
After accounting for the stock split, the basic earnings per share and diluted
earnings per share increased to $0.44 and $0.43 respectively (based on 8,396,000
and 8,650,000 weighted average shares outstanding, respectively), compared to
$0.40 and $0.40 respectively (based on 8,397,000 and 8,397,000 weighted average
shares outstanding, respectively), in the first quarter ended June 30, 2001.
The Company's balance sheet remains strong. The Company's cash and cash
equivalents for the quarter was $28.2 million, as compared to $31.5 million on
March 31, 2002. Working capital was $59.3 million as of June 30, 2002, versus
$54.9 million as of March 31, 2002. Part of the internal funding was used for
the new plant construction in Dongguan. The Company has no long-term or
short-term borrowings.
Mr. Richard Lau, chairman and chief executive officer, commented, "As with most
OEM manufacturers in Asia, Deswell has been affected by pricing pressure over
the past year. This quarter, our electronics-assembly and metallic-products
divisions recorded a 23.5% increase in sales. Much of this increase was offset
by Jetcrown, our injection-molding division, which experienced a 6.8% decrease
in revenues largely due to pricing pressure. The 10.7% decrease in operating
income from $4.0 million to $3.5 million was mainly due to increased general and
administrative expenses of $348,000 resulting from increased compensation from
our expanded tooling division."
Mr. Lau continued, "The construction of our new manufacturing plant in Dongguan
has been progressing well though it was delayed for three months due to
unforeseeable rainy weather and government procedures. The Phase I construction
will be completed by November 2002 and be operational by March 2003. With
significantly enhanced software and hardware at this new facility, we should be
well-positioned to compete for new business, particularly in the automotive
industry. Moreover, we will continue planning and monitoring our investments and
expanding our facilities as orders justify."
ANNUAL GENERAL MEETING
The Company announced that the 2002 Annual General Meeting will be held at 9:30
a.m. on September 23, 2002, at the Waldorf Astoria Hotel, 301 Park Avenue, New
York, NY 10022, U.S.A.
FIRST QUARTER DIVIDENDS
The Company also announced that on August 10, 2002, its board of directors
declared a dividend of $0.19 per share for the first quarter. The dividend will
be payable on September 3, 2002, to shareholders of record as of August 21,
2002.
Deswell manufactures injection-molded plastic parts and components, electronic
products and subassemblies, and metallic products for original equipment
manufacturers ("OEMs") and contract manufacturers at its factories in the
People's Republic of China. The Company produces a wide variety of plastic parts
and components used in the manufacture of consumer and industrial products;
printed circuit board assemblies using surface mount ("SMT"), and pin-through
hole ("PHT") interconnection technologies; and finished products such as
telephones, telephone answering machines, sophisticated studio-quality audio
equipment and computer peripherals. The Company's customers include Kyocera Mita
Industrial Co. (H.K.) Limited, Epson Precision (H.K.) Ltd., Inter-Tel
Incorporated, Vtech Communications Ltd., Peavey Electronics Corporation and
Emerson.
To learn more about Deswell Industries, Inc., please visit the Company's web
site at www.deswell.com.
---------------
- MORE -
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter ended
June 30,
2002 2001
----------------------
Net sales $ 23,305 $ 21,884
Cost of sales 15,858 14,361
-------- --------
Gross profit 7,447 7,523
Selling, general and administrative expenses 3,915 3,567
-------- --------
Operating income 3,532 3,956
Interest expense (6) (11)
Other income, net 430 79
-------- --------
Income before income taxes 3,956 4,024
Income taxes (290) 210
-------- --------
Income before minority interests 4,246 3,814
Minority interests 555 445
-------- --------
Net income $ 3,691 $ 3,369
======== ========
Basic:
Net income per share (note 3) $ 0.44 $ 0.40
======== ========
Weighted average common shares 8,396 8,397
======== ========
outstanding (in thousands) (note 4)
Diluted:
Net income per share (note 3) $ 0.43 $ 0.40
======== ========
Weighted average common and potential 8,650 8,397
======== ========
Common shares (in thousands) (note 4)
- MORE -
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS IN THOUSANDS)
June 30, March 31,
2002 2002
---- ----
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 28,205 $ 31,534
Restricted cash 2,779 2,861
Marketable securities 3,674 1,115
Accounts receivable, net 18,682 16,888
Inventories 13,064 13,225
Prepaid expenses and other current assets 7,273 3,421
Income taxes receivable 751 428
-------- --------
Total current assets 74,428 69,472
Property, plant and equipment - net 25,812 24,794
Goodwill 358 478
-------- --------
Total assets $100,598 $ 94,744
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,757 $ 7,583
Bank loans -- 482
Customer deposits and accrued expenses 5,220 6,320
Income taxes payable 160 165
-------- --------
Total current liabilities 15,137 14,550
-------- --------
Deferred income tax 15 15
-------- --------
Minority interests 11,083 10,528
-------- --------
Shareholders' equity
Common stock
-authorized 30,000,000 shares; issued and outstanding
8,470,246 shares at June 30, 2002 and
8,370,496 at March 31, 2002 (note 4) 56 56
Additional paid-in capital 27,543 26,522
Retained earnings 46,764 43,073
-------- --------
Total shareholders' equity 74,363 69,651
-------- --------
Total liabilities and shareholders' equity $100,598 $ 94,744
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- MORE -
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS)
Quarter ended
JUNE 30,
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 3,691 $ 3,369
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,339 1,243
Gain on sale of property, plant and equipment (2) (22)
Minority interests 555 445
Changes in current assets and liabilities:
Accounts receivable (1,794) (1,913)
Marketable securities (2,559) (493)
Inventories 161 (37)
Prepaid expenses and other current assets (3,852) (200)
Income taxes receivable (323) 0
Accounts payable 2,174 2,436
Customer deposits and accrued expenses (1,100) (82)
In income taxes payable (5) (88)
-------- --------
Net cash (used in)/provided by operating activities (1,715) 4,658
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (2,241) (655)
Proceeds from disposal of property, plant and equipment 6 67
Increase in restricted cash 82 (489)
-------- --------
Net cash used in investing activities (2,153) (1,077)
-------- --------
Cash flows from financing activities
Common stock issued 1,021 52
(Decrease)/increase in bank loans (482) 482
-------- --------
Net cash provided by financing activities 539 534
-------- --------
Net (decrease)/increase in cash and cash equivalents (3,329) 4,115
Cash and cash equivalents, at beginning of period 31,534 25,330
-------- --------
Cash and cash equivalents, at end of period 28,205 29,445
======== ========
Supplementary disclosures of cashflow information: Cash paid during the period
for:
Interest 6 12
Income taxes 38 298
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- MORE -
DESWELL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1. MANAGEMENT'S STATEMENT
In the opinion of Management, the accompanying unaudited financial
statements contain all adjustments (all of which are normal and
recurring in nature) necessary to present fairly the financial
position of Deswell Industries, Inc. (the "Company") at June 30, 2002
and March 31, 2002, the results of operations for the quarters ended
June 30, 2002 and June 30, 2001, and the cash flows for the quarters
ended June 30, 2002 and June 30, 2001. The notes to the Consolidated
Financial Statements, which are contained in the Form 20-F Annual
Report filed on July 11, 2002 under the Securities Exchange Act of
1934 should be read in conjunction with these Consolidated Financial
Statements.
2. INVENTORIES
June 30, March 31,
2002 2002
---------- ----------
Inventories by major categories :
Raw materials $ 7,341 $ 7,368
Work in progress 3,643 3,213
Finished goods 2,080 2,644
---------- ----------
$ 13,064 $ 13,225
========== ==========
3. EARNINGS PER SHARE
The basic net income per share and diluted net income per share are
computed in accordance with the Statement of Financial Accounting
Standards No.128 "Earnings Per Share."
The basic net income per share is computed by dividing income
available to common holders by the weighted average number of common
shares outstanding during the period. Diluted net income per share
gives effect to all dilutive potential common shares outstanding
during the period. The weighted average number of common shares
outstanding is adjusted to include the number of additional common
shares that would have been outstanding if the dilutive potential
common shares had been issued. In computing the dilutive effect of
potential common shares, the average stock price for the period is
used in determining the number of treasury shares assumed to be
purchased with the proceeds from exercise of options.
The net income for the quarters ended June 30, 2002 and 2001 were
both from the Company's continuing operations.
4. STOCK SPLIT
On June 17,2002, the Company announced that it is effecting a
three-for-two stock split of its outstanding shares to holders of
record on July 8, 2002 and payable on July 22, 2002. In conjunction
with this stock split and proportionate to it, the Memorandum of
Association will be amended effective on July 8, 2002 to increase
authorized capital to 30,000,000 common shares. This amendment will
also result in the par value of its shares converting to no par value
per share.
The shares issued and outstanding at June 30,2002 prior to the stock
split was 5,646,831 shares.
- MORE -
DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The Company's revenues are derived from the manufacture and sale of (i)
injection-molded plastic parts and components, (ii) electronic products and
subassemblies and (iii) metallic parts and components. The Company carries out
all of its manufacturing operations in southern China, where it is able to take
advantage of the lower overhead costs and inexpensive labor rates as compared to
Hong Kong.
QUARTER ENDED JUNE 30, 2002 COMPARED TO QUARTER ENDED JUNE 30, 2001
The Company's net sales for the quarter ended June 30, 2002 were $23,305,000, an
increase of $1,421,000 or 6.5% as compared to the corresponding period in 2001.
The increase in sales was mainly related to increases in sales of electronic &
metallic products of $2,254,000 offset by a decrease in sales of plastic
injection molding products of $833,000. This represented an increase of 23.5%
and a decrease of 6.8% respectively, as compared with the net sales in the
corresponding period in the prior year.
The increase in net sales in the electronic and metallic division was mainly due
to an increase in orders from its existing customers as well as new customers.
The gross profit for the quarter ended June 30, 2002 was $7,447,000,
representing a gross profit margin of 32.0%. This compares with the overall
gross profit and gross profit margin of $7,523,000 or 34.4% for the quarter
ended June 30, 2001.
Selling, general and administrative expenses for the quarter ended June 30, 2002
were $3,915,000, amounting to 16.8% of total net sales, as compared to
$3,567,000 or 16.3% of total net sales for the quarter ended June 30, 2001. The
increase in selling, general and administrative expenses of $348,000 was mainly
attributed to increased compensation as a result of our expanded tooling
division.
As a result, operating income was $3,532,000 for the quarter ended June 30,
2002, a decrease of $424,000 or 10.7% as compared with the corresponding quarter
in the prior year.
Minority interests represent the 49% minority interest in both the electronics
and metallic subsidiaries and the marketing subsidiary. The increase in minority
interest to $555,000 for the quarter ended June 30, 2002, from $445,000 for the
corresponding quarter in the prior year reflects the increased profits generated
by the electronic and metallic business.
As a result of the above factors, net income was $3,691,000 for the quarter
ended June 30, 2002, an increase of $322,000 or 9.6%, as compared to the quarter
ended June 30, 2001 and net income as a percentage of net sales slightly
increased to 15.8% from 15.4%.
- MORE -
DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Traditionally, the Company has relied primarily upon internally generated funds
and short-term borrowings (including trade finance facilities) to finance its
operations and expansion, although capital expenditure has been partly financed
by long-term debt, including capital leases.
As of June 30, 2002, the Company had a working capital surplus of $59,291,000.
This compares with a working capital surplus of $54,922,000 at March 31, 2002.
The increase in working capital was mainly attributed to net cash generated from
its operating activities.
The Company has generated sufficient funds from its operating activities to
finance its operations and there is little need for external financing other
than short-term borrowings that are used to finance accounts receivable and are
generally paid with cash generated from operations. The Company has no
short-term borrowings and no long-term debt at June 30, 2002.
As of June 30, 2002, the Company had in place general banking facilities with
seven financial institutions aggregating approximately $19,515,000. Such
facilities, which are subject to annual review, include overdrafts, letters of
credit, import facilities, trust receipt financing, inward bills financing as
well as fixed loans. As of June 30, 2002, the Company had ( i ) unused credit
facilities of $18,828,000 ( ii ) cash and cash equivalents of $28,205,000 and (
iii ) restricted cash of $2,779,000, which has been pledged as collateral for
those credit facilities. The restricted cash of $2,748,000 and leasehold land
and buildings of $1,341,000 have been pledged as collateral for those credit
facilities. The Company also had $31,000 pledged as deposit for customs duty in
Dongguan, China.
The Company expects that working capital requirements and capital additions will
be funded through a combination of internally generated funds and existing
facilities.
- END -
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
For and on behalf
of Deswell Industries, Inc.
By:_________/s/________________
Richard Lau
Chief Executive Officer
Date: August 12, 2002