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 FEBRUARY 4, 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)
CONTACT:
John G. Nesbett
Lippert/Heilshorn & Associates
212-838-3777, ext. 6631
email: jnesbett@lhai.com
DESWELL INDUSTRIES, INC.
ANNOUNCES EPS OF $0.61 PER SHARE FOR THE THIRD QUARTER
- OPERATING INCOME UP 3% -
- THIRD QUARTER DIVIDEND OF $0.24 PER SHARE -
HONG KONG (February 4, 2002) - Deswell Industries, Inc. (Nasdaq: DSWL) today
announced its results for the third quarter and nine months ended December 31,
2001.
Net sales for the quarter were $20.2 million, a decrease of 5% compared to sales
of $21.4 million in the third quarter ended December 31, 2000. Operating income
increased 3% to $3.4 million, compared to $3.3 million in the previous year. Net
income for the quarter decreased 4% to $3.4 million, compared to $3.6 million in
the previous year. The decrease is mainly attributed to less interest income as
a result of the decline in interest rates this year. Diluted earnings per share
decreased 7% to $0.61 based on 5,622,000 weighted average shares outstanding,
compared to $0.66 based on 5,454,000 weighted average shares outstanding in the
third quarter ended December 31, 2000.
Net sales for the nine months ended December 31, 2001 were $64.3 million, an
increase of 1% compared to sales of $64.0 million for the corresponding period
in 2000. Operating income remained the same at $11.2 million for both periods.
Net income was $10.4 million, compared to $10.4 million in the previous year.
Diluted earnings per share decreased 3% to $1.86 based on 5,612,000 weighted
average shares outstanding, compared to $1.92 based on 5,407,000 weighted
average shares outstanding for the nine months ended December 31, 2000.
The Company's balance sheet remains strong. The Company's cash and cash
equivalents for the nine months increased to $32.3 million, compared to $25.3
million on March 31, 2001. The Company has no long-term borrowings.
Mr. Richard Lau, Chairman and Chief Executive Officer, commented, "Like many OEM
manufacturers, our business continues to be impacted by the economic slowdown,
which has resulted in delayed orders from some customers. We are proud of the
fact that despite a very slight decline in revenue during the quarter, operating
income increased due to a reduction in selling, general & administrative
expenses.
Mr. Lau continued, "We will commence construction in March of a new plastic
manufacturing plant in Dongguan. Construction is expected to be complete by
August 2002. The new facility will expand the capacity of our plastics division
by approximately 40 percent and enable us to accept additional business we
anticipate from existing customers. Additionally, we have strengthened our
marketing team and added some seasoned professionals from the industry. We
believe that our performance will gradually improve in the coming year."
THIRD QUARTER DIVIDENDS
-----------------------
The Company also announced that on February 2, 2002 its board of directors
declared a dividend of $0.24 per share for the third quarter. The dividend will
be payable on February 25, 2002 to shareholders of record as of February 11,
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., 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.
TABLES FOLLOW
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA )
Quarter ended Nine months ended
December 31, December 31,
--------------------- ----------------------
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales $ 20,217 $21,376 $ 64,290 $ 63,971
Cost of sales 12,992 13,757 41,978 40,942
-------- ------- -------- --------
Gross profit 7,225 7,619 22,312 23,029
Selling, general and administrative expenses 3,778 4,282 11,103 11,801
-------- ------- -------- --------
Operating income 3,447 3,337 11,209 11,228
Interest expense (8) -- (19) (5)
Other income, net 156 436 480 610
-------- ------- -------- --------
Income before income taxes 3,595 3,773 11,670 11,833
Income taxes 87 97 492 560
-------- ------- -------- --------
Income before minority interests 3,508 3,676 11,178 11,273
Minority interests 78 87 744 916
-------- ------- -------- --------
Net income $ 3,430 $ 3,589 $ 10,434 $ 10,357
======== ======= ======== ========
Basic earnings per share (note 3) $ 0.61 $ 0.67 $ 1.86 $ 1.94
======== ======= ======== ========
Weighted average number of shares 5,601 5,358 5,600 5,352
======== ======= ======== ========
outstanding (in thousands)
Diluted earnings per share (note 3) $ 0.61 $ 0.66 $ 1.86 $ 1.92
======== ======= ======== ========
Diluted weighted average number of shares 5,622 5,454 5,612 5,407
======== ======= ======== ========
outstanding (in thousands)
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DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS IN THOUSANDS)
December 31, March 31,
2001 2001
---- ----
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $32,347 $25,330
Restricted cash 2,827 1,988
Marketable securities 564 --
Accounts receivable, net 17,119 15,777
Inventories 12,949 12,034
Prepaid expenses and other current assets 3,167 1,833
Income taxes receivable 428 428
------- -------
Total current assets 69,401 57,390
Property, plant and equipment - net 24,087 25,563
Goodwill 486 513
------- -------
Total assets $93,974 $83,466
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,075 $ 4,274
Bank loans 482 --
Customer deposits and accrued expenses 7,280 5,462
Income taxes payable 293 298
------- -------
Total current liabilities 15,130 10,034
------- -------
Deferred income tax 15 15
------- -------
Minority interests 10,347 9,540
------- -------
Shareholders' equity
Common stock
-- authorized 20,000,000 shares; issued and outstanding
5,601,431 shares at December 31, 2001 and
5,597,931 shares at March 31, 2001 56 56
Additional paid-in capital 26,894 26,843
Retained earnings 41,532 36,978
------- -------
Total shareholders' equity 68,482 63,877
------- -------
Total liabilities and shareholders' equity $93,974 $83,466
======= =======
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DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS)
Nine months ended
December 31,
--------------------------
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 10,434 $ 10,357
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,663 3,707
(Gain)/loss on disposal of property, plant and equipment (21) 15
Minority interests 807 916
Changes in operating assets and liabilities:
Accounts receivable (1,342) (7,401)
Marketable securities (564) 1,306
Inventories (915) (1,329)
Prepaid expenses and other current assets (1,334) (2,029)
Income taxes receivable -- 164
Accounts payable 2,801 440
Customer deposits and accrued expenses 1,818 1,284
Income taxes payable (5) 314
-------- --------
Net cash provided by operating activities 15,342 7,744
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (2,216) (8,297)
Proceeds from disposal of property, plant & equipment 77 6
Increase in restricted cash (839) (118)
-------- --------
Net cash used in investing activities (2,978) (8,409)
-------- --------
Cash flows from financing activities
Common Stock issued 51 159
xchange difference on translation
E -- (35)
ncrease in bank loans
I 482 --
Dividends paid (5,880) (4,710)
-------- --------
Net cash used in financing activities (5,347) (4,586)
-------- --------
Net Increase/(decrease) in cash and cash equivalents 7,017 (5,251)
Cash and cash equivalents, at beginning of period 25,330 27,156
-------- --------
Cash and cash equivalents, at end of period 32,347 21,905
======== ========
Supplementary disclosures of cashflow information :
Cash paid during the period for :
Interest 19 5
Income taxes 497 404
======== ========
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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 December 31,
2001 and March 31, 2001, the results of operations for the quarters
and nine months ended December 31, 2001 and December 31, 2000, and
the cash flows for the nine months ended December 31, 2001 and
December 31, 2000. The notes to the Consolidated Financial Statements
that 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
-----------
December 31, March 31,
2001 2001
----------------- -------------
Inventories by major categories:
Raw materials $ 6,722 $ 6,129
Work in progress 3,806 2,947
Finished goods 2,421 2,958
---------------- ------------
$ 12,949 $ 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 and nine months ended December 31,
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 DECEMBER 31, 2001 COMPARED TO QUARTER ENDED DECEMBER 31, 2000
---------------------------------------------------------------------------
The Company's net sales for the quarter ended December 31, 2001 were
$20,217,000, a decrease of $1,159,000, or 5.4%, as compared to the corresponding
period in 2000. The decrease in sales was mainly related to a decrease in sales
of injection-molded plastic products of $1,313,000 offset by the increase in
sales of electronic and metallic products of $154,000. This represented a
decrease of 9.8% and an increase of 1.9%, respectively, as compared with the net
sales in the corresponding period in the prior year.
The gross profit for the quarter ended December 31, 2001 was $7,225,000,
representing a gross profit margin of 35.7%. This compares with the overall
gross profit and gross profit margin of $7,619,000 or 35.6% respectively for the
quarter ended December 31, 2000.
Selling, general and administrative expenses for the quarter ended December 31,
2001 were $3,778,000, or 18.7% of total net sales, compared with $4,282,000 or
20.0% of total net sales for the quarter ended December 31, 2000. The decrease
in selling, general and administrative expenses of $504,000 over the
corresponding period was mainly attributed to the strict control on these
expenses.
As a result of the decrease in sales revenue and selling, general &
administrative expenses, operating income was $3,447,000 for the quarter ended
December 31, 2001; an increase of $110,000 or 3.3% as compared with the
corresponding quarter in the prior year.
Minority interest represents the 49% minority interest in both the electronics
and metallic subsidiaries. The decrease in minority interest to $78,000 for the
quarter ended December 31, 2001 from $87,000 for the quarter ended December 31,
2000 reflects the decreased profits generated by the electronic and metallic
business.
As a result of the above factors, net income was $3,430,000 for the quarter
ended December 31, 2001, a decrease of $159,000 or 4.4%, as compared to the
quarter ended December 31, 2000 and net income as a percentage of net sales
increased slightly to 17.0% from 16.8%.
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DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
NINE MONTHS ENDED DECEMBER 31, 2001 COMPARED TO NINE MONTHS
------------------------------------------------------------
ENDED DECEMBER 31, 2000
-----------------------
The Company's net sales for the nine months ended December 31, 2001 were
$64,290,000, an increase of $319,000 or 0.5% as compared to corresponding period
in 2000. The increase in sales was mainly related to increase in sales of
electronic and metallic products of $1,762,000 offset by the decrease in sales
of plastic injection-molding products of $1,443,000. This represented an
increase of 6.8% and a decrease of 3.8%, respectively, as compared with the net
sales in the corresponding period in the prior year.
The gross profit for the nine months ended December 31, 2001 was $22,312,000,
representing a gross profit margin of 34.7%. This compares with the overall
gross profit and gross profit margin of $23,029,000 or 36.0% for the nine months
ended December 31, 2000. The decrease in the overall gross profit margin of 1.3%
was mainly attributed to the combined effect of the increase in resin costs and
electronics component costs in the plastic and electronic division respectively.
Selling, general and administrative expenses for the nine months ended December
31, 2001 were $11,103,000, amounting to 17.3% of total net sales, as compared to
$11,801,000 or 18.4% of total net sales for the nine months ended December 31,
2000. The decrease in selling, general and administrative expenses of $698,000
over the corresponding period was mainly attributed to the strict control on
these expenses.
As a result, operating income was $11,209,000 for the nine months ended December
31, 2001, a decrease of $19,000 or 0.2% as compared with the corresponding
period in the prior year.
Minority interest represents the 49% minority interest in both the electronics
and metallic subsidiaries. The decrease in minority interest to $744,000 for the
nine months ended December 31, 2001 from $916,000 for the nine months ended
December 31, 2000 reflects the decreased profits generated by the electronic and
metallic business.
As a result of the above factors, net income was $10,434,000 for the nine months
ended December 31, 2001, an increase of $77,000 or 0.7%, as compared to the nine
months ended December 31, 2000 and net income as a percentage of net sales
remained at 16.2%.
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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 December 31, 2001, the Company had a working capital surplus of
$54,271,000. This compares with a working capital surplus of $47,356,000 at
March 31, 2001. The increase in working capital was mainly attributed to the net
cash generated from operating activites offset by a dividend distribution of
$5,880,000 and the capital investment of $2,216,000 during the nine months ended
December 31, 2001.
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 from cash generated from operations. The Company has outstanding
short-term borrowings of $482,000 and no long-term debt at December 31, 2001.
As of December 31, 2001, the Company had in place general banking facilities
with six financial institutions aggregating approximately $18,224,000. Such
facilities, which are subject to annual review, include overdrafts, letters of
credit, import facilities, trust receipt financing, bills negotiation
facilities, factoring facilities as well as fixed loans. As of December 31,
2001, the Company had ( i ) unused credit facilities of $17,198,000 ( ii ) cash
and cash equivalents of $32,347,000 and ( iii ) restricted cash of $2,827,000.
The restricted cash of 2,750,000 and leasehold land and buildings of $1,355,000
have been pledged as collateral for those credit facilities. The Company also
had $77,000 pledged as deposit for custom duties in Dongguan, China.
The Company expects that working capital requirements and capital additions will
continue to be funded through a combination of cash on hand, internally
generated funds and existing facilities.
- end -
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
Chief Executive Officer
Date: February 9, 2002