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 14, 2001
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)
CONTACT:
John G. Nesbett
Lippert/Heilshorn & Associates
212-838-3777, ext. 6631
e-mail: jnesbett@lhai.com
DESWELL INDUSTRIES, INC.
ANNOUNCES 23% INCREASE IN FIRST QUARTER REVENUES
-OPERATING INCOME INCREASES 40 PERCENT-
-COMPANY ALSO ANNOUNCES FIRST QUARTER DIVIDEND OF $0.24 PER SHARE-
HONG KONG (August 14, 2001) - Deswell Industries, Inc. (Nasdaq: DSWL) today
announced its results for the first quarter ended June 30, 2001.
Net sales for the quarter ended June 30, 2001 were $21.9 million, an increase of
23% compared to net sales of $17.8 million for the quarter ended June 30, 2000.
Operating income increased 40% to $4.0 million, compared to $2.8 million for the
same quarter in 2000. Net income for the quarter increased 22% to $3.4 million
compared to $2.8 million for the year-ago quarter. Basic earnings per share and
diluted earnings per share increased to $0.60 and $0.60 respectively (based on
5,598,000 and 5,598,000 weighted average shares outstanding, respectively),
compared to $0.52 and $0.51 respectively (based on 5,348,000 and 5,407,000
weighted average shares outstanding, respectively), in the first quarter ended
June 30, 2000.
The Company's balance sheet remains strong. The Company's cash and cash
equivalents for the quarter increased to $29.4 million, compared to $25.3
million on March 31, 2001. The Company has no long-term borrowings.
Mr. Lau, chairman and chief executive officer, commented, "We are very pleased
to announce that the Company reported a 23% increase in net sales and a 22%
increase in net income in the first quarter compared to last year. Despite the
downturn in global manufacturing driven by declining sales orders, we are glad
to have been able to sustain strong growth in our business and maintain a
healthy profit margin due largely to increased orders from new customers in both
our electronics and metallics divisions. However, while our business remains
strong, we realize that we are not immune to the macro-economic environment, and
we are being more cautious concerning capacity expansion to protect our strong
balance sheet."
Mr. Lau continued, "Strengthening our marketing team has been one of our top
priorities over the last couple of years. We are encouraged by these efforts,
and look forward to maintaining our solid performance."
ANNUAL GENERAL MEETING
- ----------------------
The Company announced that the 2001 Annual General Meeting will be held at 10:00
a.m. on September 24, 2001 in the Linden Room of the Four Seasons Hotel, 300 S.
Doheny Drive, Los Angeles, CA 90048.
FIRST QUARTER DIVIDENDS
- -----------------------
The Company also announced that on August 10, 2001 its board of directors
declared a dividend of $0.24 per share for the first quarter. The dividend will
be payable on September 3, 2001 to shareholders of record as of August 20, 2001.
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., Namtai Electronics
(Shenzhen) Co. 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,
2001 2000
---- -----
Net sales $ 21,884 $ 17,786
Cost of sales 14,361 11,531
-------------- ----------
Gross profit 7,523 6,255
Selling, general and administrative expenses 3,567 3,435
-------------- -----------
Operating income 3,956 2,820
Interest expense (11) 0
Other income, net 79 229
-------------- -----------
Income before income taxes 4,024 3,049
Income taxes 210 204
-------------- -----------
Income before minority interests 3,814 2,845
Minority interests 445 88
-------------- -----------
Net income $ 3,369 $ 2,757
============== ===========
Basic:
Net income per share (note 3) $ 0.60 $ 0.52
============== ===========
Weighted average common shares 5,598 5,348
============== ===========
outstanding (in thousands)
Diluted:
Net income per share (note 3) $ 0.60 $ 0.51
============= ===========
Weighted average common and potential 5,598 5,407
============== ===========
Common shares (in thousands)
- MORE -
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS IN THOUSANDS)
June 30, March 31,
2001 2001
---- ----
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 29,445 $ 25,330
Restricted cash 2,477 1,988
Marketable securities 493 -
Accounts receivable, net 17,690 15,777
Inventories 12,071 12,034
Prepaid expenses and other current assets 2,033 1,833
Income taxes receivable 428 428
--------------- -----------------
Total current assets 64,637 57,390
Property, plant and equipment - net 24,939 25,563
Goodwill 504 513
--------------- ----------------
Total assets $ 90,080 $ 83,466
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,710 $ 4,274
Bank loans 482 -
Customer deposits and accrued expenses 5,380 5,462
Income taxes payable 210 298
--------------- ----------------
Total current liabilities 12,782 10,034
--------------- ----------------
Deferred income tax 15 15
--------------- ----------------
Minority interests 9,985 9,540
--------------- ---------------
Shareholders' equity
Common stock
- authorized 20,000,000 shares; issued and outstanding
5,601,431 shares at June 30, 2001 and
5,597,931 at March 31, 2001 56 56
Additional paid-in capital 26,895 26,843
Retained earnings 40,347 36,978
--------------- ---------------
Total shareholders' equity 67,298 63,877
--------------- ---------------
Total liabilities and shareholders' equity $ 90,080 $ 83,466
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- MORE -
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS)
QUARTER ENDED
JUNE 30,
--------
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 3,369 $ 2,757
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,243 1,232
Loss on sale of property, plant and equipment (22) 6
Minority interests 445 88
Changes in current assets and liabilities:
Accounts receivable (1,913) (1,530)
Marketable securities (493) 582
Inventories (37) (1,295)
Prepaid expenses and other current assets (200) 360
Income taxes receivable 0 0
Accounts payable 2,436 634
Customer deposits and accrued expenses (82) (674)
In income taxes payable (88) 52
-------- --------
Net cash provided by operating activities 4,658 2,212
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (655) (1,531)
Proceeds from disposal of property, plant and equipment 67 0
Increase in restricted cash (489) (19)
-------- --------
Net cash used in investing activities (1,077) (1,550)
-------- --------
Cash flows from financing activities
Common stock issued 52 0
Exchange difference on translation 0 (35)
Increase in bank loans 482 0
-------- --------
Net cash provided by/(used in) financing activities 534 (35)
-------- --------
Net increase in cash and cash equivalents 4,115 627
Cash and cash equivalents, at beginning of period 25,330 27,156
-------- --------
Cash and cash equivalents, at end of period 29,445 27,783
======== ========
Supplementary disclosures of cashflow information:
Cash paid during the period
for:
Interest 12 0
Income taxes 298 152
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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, 2001
and March 31, 2001, the results of operations for the quarters ended
June 30, 2001 and June 30, 2000, and the cash flows for the quarters
ended June 30, 2001 and June 30, 2000. The notes to the Consolidated
Financial Statements, which are contained in the Form 20-F Annual
Report filed on July 10, 2001 under the Securities Exchange Act of
1934 should be read in conjunction with these Consolidated Financial
Statements.
2. INVENTORIES
-----------
June 30, March 31,
2001 2001
------------- ----------
Inventories by major categories:
Raw materials $ 6,441 $ 6,129
Work in progress 3,512 2,947
Finished goods 2,118 2,958
------------- ----------
$ 12,071 $ 12,034
============= ==========
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, 2001 and 2000 were
both from the Company's continuing operations.
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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, 2001 COMPARED TO QUARTER ENDED JUNE 30, 2000
- -------------------------------------------------------------------
The Company's net sales for the quarter ended June 30, 2001 were $21,884,000, an
increase of $4,098,000 or 23.0% as compared to the corresponding period in 2000.
The increase in sales was mainly related to increases in sales of
injection-molded plastic and electronic & metallic products of $1,754,000 and
$2,344,000 respectively. This represented increases of 16.6% and 32.4%
respectively, as compared with the net sales in the corresponding period in the
prior year.
The increase in net sales in respective divisions was mainly due to increase in
orders from its existing customers as well as new customers.
The gross profit for the quarter ended June 30, 2001 was $7,523,000,
representing a gross profit margin of 34.4%. This compares with the overall
gross profit and gross profit margin of $6,255,000 or 35.2% for the quarter
ended June 30, 2000.
Selling, general and administrative expenses for the quarter ended June 30, 2001
were $3,567,000, amounting to 16.3% of total net sales, as compared to
$3,435,000 or 19.3% of total net sales for the quarter ended June 30, 2000.
As a result of the increase in net sales, operating income was $3,956,000 for
the quarter ended June 30, 2001, an increase of $1,136,000 or 40.3% as compared
with the corresponding quarter in the prior year.
Minority interests represent the 49% minority interest in both the electronics
and metallic subsidiaries. The increase in minority interest to $445,000 for the
quarter ended June 30, 2001 from $88,000 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 $3,369,000 for the quarter
ended June 30, 2001, an increase of $612,000 or 22.2%, as compared to the
quarter ended June 30, 2000 and net income as a percentage of net sales slightly
decreased to 15.4% from 15.5%.
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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, 2001, the Company had a working capital surplus of $51,855,000.
This compares with a working capital surplus of $47,356,000 at March 31, 2001.
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 outstanding
short-term borrowings of $482,000 and no long-term debt as of June 30, 2001.
As of June 30, 2001, the Company had in place general banking facilities with
four financial institutions aggregating approximately $18,129,000. 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, 2001, the Company had (i) unused credit
facilities of $16,839,000 (ii) cash and cash equivalents of $29,445,000 and
(iii) restricted cash of $2,477,000 and (iv) short-tem bank loans of $482,000.
The restricted cash of $2,346,000 and leasehold land and buildings of $1,370,000
have been pledged as collateral for those credit facilities. The Company also
had $131,000 pledged as deposit for customs duty in Dongguan, China.
The Company expects that working capital requirements and capital additions will
continue to be funded through cash on hand and internally generated funds.
With the exception of the reference in its press release to its web
site for more information, the Registrant hereby incorporates this Report on
Form 6-K into its Registration Statement on Form F-3 (Registration No.
333-49050).
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
------------------------
Richard Lau
Chief Executive Officer
Date: August 14, 2001
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