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 JUNE 6, 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
e-mail: jnesbett@lhai.com
DESWELL INDUSTRIES, INC.
ANNOUNCES 18% INCREASE IN FOURTH QUARTER NET INCOME
-COMPANY ALSO ANNOUNCES FOURTH QUARTER DIVIDEND OF $0.28 PER SHARE-
HONG KONG (June 6, 2002) - Deswell Industries, Inc. (Nasdaq: DSWL) today
announced its results for the fourth quarter and year ended March 31, 2002.
Net sales for the fourth quarter increased 13% to $19.0 million compared to
sales of $16.9 million in the fourth quarter ended March 31, 2001. Operating
income increased 69% to $2.7 million for the most recent quarter, compared to
$1.6 million for the year-ago quarter. Net income for the fourth quarter
increased 18% to $2.9 million compared to $2.5 million for the year-ago quarter.
Basic earnings per share and diluted earnings per share increased to $0.52 and
$0.50 respectively (based on 5,606,000 and 5,745,000 weighted average shares
outstanding, respectively), compared to $0.45 and $0.45 respectively (based on
5,451,000 and 5,465,000 weighted average shares outstanding, respectively), in
the fourth quarter ended March 31, 2001.
Net sales for the year ended March 31, 2002, were $83.3 million, an increase of
3% compared to sales of $80.8 million for the year ended March 31, 2001.
Operating income increased 9% to 13.9 million, compared to $12.8 million in the
previous year, and net income increased 4% to $13.3 million, compared to $12.8
million in the previous year. Basic earnings per share and diluted earnings per
share increased to $2.38 and $2.36 respectively (based on 5,602,000 and
5,644,000 weighted average shares outstanding, respectively), compared to $2.38
and $2.36 respectively (based on 5,376,000 and 5,435,000 weighted average shares
outstanding, respectively), for the year ended March 31, 2001.
The Company's balance sheet remains strong. The Company's cash and cash
equivalents increased to $31.5 million at March 31, 2002, compared to $25.3
million on March 31, 2001. Working capital was $54.9 million as of March 31,
2002, versus $47.3 million as of March 31, 2001. The Company has no long-term
borrowings.
Mr. Richard Lau, chairman and chief executive officer, commented, "Our efforts
to turn around the performance at our electronics-assembly and metallic-products
divisions paid off during the quarter with a combined 44% increase in sales at
these two divisions. This increase was slightly offset by Jetcrown, our
injection-molding division, which experienced a 3.5% decrease in revenues due to
the soft economy, particularly in the telecommunications industry where we have
some key OEM customers, and a 5% to 10% reduction in pricing. The impact of the
pricing adjustment was minimized by higher sales volume and increased efficiency
during the quarter. Furthermore, we are encouraged about the prospects for our
injection-molding division, particularly due to China's entry into the WTO. The
gradual shift of our injection operation to a new factory in early fiscal 2003
significantly increases our production capacity with considerable cost benefits.
These savings should be substantially realized in the third quarter of fiscal
2003."
Mr. Lau continued, "Throughout the year we focused on keeping costs
down to maximize profits in this uncertain economic environment. I am
particularly pleased with our strong gross margins and reduced SG&A as a
percentage of sales for the quarter and the year despite increased rental and
transportation expenses, as well as an expanded marketing force."
FOURTH QUARTER & FINAL DIVIDENDS
The Company also announced that on May 30, 2002, its board of directors declared
a final cash dividend of $0.28 per share (totally $1.00 cash dividend per share
for the year ended March 31, 2002, compared to $0.90 per share in 2001). The
dividend will be payable on July 3, 2002, to shareholders of record as of June
17, 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 Telecommunications 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
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Quarter ended Year ended
March 31, March 31,
2002 2001 2002 2001
---- ---- ---- ----
(Unaudited) (Unaudited) (Audited)
Net sales $19,030 $16,876 $ 83,320 $ 80,847
Cost of sales 12,470 11,654 54,448 52,596
------------- ------------ ------------ -------------
Gross profit 6,560 5,222 28,872 28,251
Selling, general and administrative expenses 3,836 3,613 14,939 15,414
------------- ------------ ------------ -------------
Operating income 2,724 1,609 13,933 12,837
Interest expense (7) (1) (26) (6)
Other income, net 397 305 877 915
------------- ------------ ------------ -------------
Income before income taxes 3,114 1,913 14,784 13,746
Income taxes 43 (245) 535 315
------------- ------------ ------------ -------------
Income before minority interests 3,071 2,158 14,249 13,431
Minority interests 181 (295) 925 621
------------- ------------ ------------ -------------
Net income $ 2,890 $ 2,453 $13,324 $12,810
============= ============ ============ =============
Basic earnings per share (note 3) $ 0.52 $ 0.45 $ 2.38 $ 2.38
============= ============ ============ =============
Weighted average number of shares
outstanding (in thousands) 5,606 5,451 5,602 5,376
============= ============ ============ =============
Diluted earnings per share (note 3) $0.50 $0.45 $2.36 $ 2.36
============= ============ ============ =============
Diluted weighted average number of shares 5,745 5,465 5,644 5,435
outstanding (in thousands)
============= ============ ============ =============
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS IN THOUSANDS)
March 31, March 31,
2002 2001
---- ----
ASSETS (Unaudited) (Audited)
Current assets :
Cash and cash equivalents $ 31,534 $ 25,330
Restricted cash 2,861 1,988
Marketable securities 1,115 --
Accounts receivable, net 16,888 15,777
Inventories 13,225 12,034
Prepaid expenses and other current assets 3,421 1,833
Income taxes receivable 428 428
--------------- ----------------
Total current assets 69,472 57,390
Property, plant and equipment - net 24,794 25,563
Goodwill 478 513
--------------- ----------------
Total assets $ 94,744 $ 83,466
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,583 $ 4,274
Bank loans 482 -
Customer deposits and accrued expenses 6,320 5,463
Income taxes payable 165 297
--------------- ----------------
Total current liabilities 14,550 10,034
--------------- ----------------
Minority interests 10,528 9,540
--------------- ----------------
Deferred income tax 15 15
--------------- ----------------
Shareholders' equity
Common stock
- authorized 20,000,000 shares;
issued and outstanding 5,580,331 shares
at March 31, 2002 and 5,597,931 shares
at March 31, 2001 56 56
Additional paid-in capital 26,522 26,843
Retained earnings 43,073 36,978
--------------- ----------------
Total shareholders' equity 69,651 63,877
--------------- ----------------
Total liabilities and shareholders' equity $ 94,744 $ 83,466
=============== ================
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS)
Year ended Year ended
March 31, March 31,
------------------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 13,324 $ 12,810
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 4,918 5,039
(Gain) loss on disposal of property, plant and equipment 7 (52)
Minority interests 988 609
Changes in current assets and liabilities:
Accounts receivable (1,111) (5,170)
Marketable securities (1,115) 1,308
Inventories (1,191) (1,102)
Prepaid expenses and other current assets (1,588) 462
Income taxes receivable - (264)
Accounts payable 3,309 (1,127)
Customer deposits and accrued expenses 857 1,101
Income taxes payable (132) 196
---------------- ----------------
Net cash provided by operating activities 18,266 13,810
---------------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (4,397) (13,926)
Proceeds from disposal of property, plant and 276 113
Equipment
(Increase)/decrease in restricted cash (873) 141
---------------- ----------------
Net cash used in investing activities (4,994) (13,672)
---------------- ----------------
Cash flows from financing activities
Repurchase of Common Stock (564) -
Issue of Common Stock 243 2,746
Increase of bank loans 482 -
Dividends paid (7,229) (4,710)
---------------- ----------------
Net cash used in financing activities (7,068) (1,964)
---------------- ----------------
Net increase/(decrease) in cash and cash equivalents 6,204 (1,826)
Cash and cash equivalents, at beginning of year 25,330 27,156
---------------- ----------------
Cash and cash equivalents, at end of year 31,534 25,330
================ ================
Supplementary disclosures of cash flow information: Cash paid during the year
for:
Interest $ 26 $ 6
Income taxes 669 383
================ ================
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 March 31, 2002 and March
31, 2001, the results of operations for the quarters and year ended
March 31, 2002 and March 31, 2001, and the cash flows for the year
ended March 31, 2002 and March 31, 2001. 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
March 31, March 31,
2002 2001
--------- ----------
Inventories by major categories :
Raw materials $ 7,368 $ 6,130
Work in progress 3,213 2,946
Finished goods 2,644 2,958
--------- ----------
$ 13,225 $ 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 year ended March 31, 2002, and 2001
were both from the Company's continuing operations.
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 MARCH 31, 2002 COMPARED TO QUARTER ENDED MARCH 31, 2001
The Company's net sales for the quarter ended March 31, 2002 were $19,030,000,
an increase of $2,154,000 or 12.8% as compared to the corresponding period in
2001. The increase in sales was mainly related to an increase in sales of
electronic and metallic products of $2,549,000 offset by a decrease in sales of
injection-molded plastic products of $395,000. This represented an increase of
44.4% and a decrease of 3.5% respectively, as compared with the net sales in the
corresponding period in the prior year.
The increase in net sales in the electronics and metallics divisions was mainly
due to an increase in orders from their existing customers, together with the
orders from new customers during the quarter ended March 31, 2002, as compared
to the prior-year period.
The gross profit for the quarter ended March 31, 2002 was $6,560,000,
representing a gross profit margin of 34.5%. This compares with the overall
gross profit and gross profit margin of $5,222,000 or 30.9% for the quarter
ended March 31, 2001.
Selling, general and administrative expenses for the quarter ended March 31,
2002 were $3,836,000, amounting to 20.2% of total net sales, as compared to
$3,613,000 or 21.4% of total net sales for the quarter ended March 31, 2001. The
increase in selling, general and administrative expenses of $223,000 over the
corresponding period was mainly attributed to the increase in general and
administrative expenses resulted from improved business over last year.
As a result of the increase in net sales, operating income was $2,704,000 for
the quarter ended March 31, 2002, an increase of $1,115,000 or 69.3% as compared
with the corresponding quarter in the prior year.
Minority interests represent the 49% minority interest in both the electronics
and metallics subsidiaries and the marketing subsidiary. The increase in
minority interest to a surplus of $181,000 for the quarter ended March 31, 2002,
from a deficiency of $295,000 for the corresponding quarter in the prior year
reflects an increase in profits in the subsidiaries.
As a result of the above factors, net income was $2,890,000 for the quarter
ended March 31, 2002, an increase of $437,000 or 17.8%, as compared to the
quarter ended March 31, 2001, and net income as a percentage of net sales
increased to 15.2% from 14.5%.
- more -
DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR ENDED MARCH 31, 2002 COMPARED TO YEAR ENDED MARCH 31, 2001
The Company's net sales for the year ended March 31, 2002, were $83,320,000, an
increase of $2,473,000 or 3.1% as compared to year ended March 31, 2001. The
increase in sales was mainly related to increases in sales of electronic and
metallic products of $4,311,000 offset by a decrease in sales of
injection-molded plastic products of $1,838,000. This represented an increase of
13.7% and a decrease of 3.7% respectively, as compared with the net sales in
prior year.
The increase in net sales in the electronics and metallics divisions was mainly
due to an increase in orders from their existing customers, together with orders
from new customers during the year.
The gross profit for the year ended March 31, 2002 was $28,872,000, representing
a gross profit margin of 34.7%. This compares with the overall gross profit and
gross profit margin of $28,251,000 or 34.9% for the year ended March 31, 2001.
Selling, general and administrative expenses for the year ended March 31, 2002
were $14,939,000, amounting to 17.9% of total net sales, as compared to
$15,414,000 or 19.1% of total net sales for the year ended March 31, 2001. The
decrease in selling, general and administrative expenses of $475,000 over the
prior year was mainly attributed to the strict control on these expenses.
As a result of the increase in sales revenue and a decrease in selling, general
& administrative expenses, operating income was $13,933,000 for the year ended
March 31, 2002, an increase of $1,096,000 or 8.5% as compared with the prior
year.
During the year ended March 31, 2002, the Company established a 51%-owned
marketing subsidiary to strengthen our marketing force. As a result, minority
interests represent the 49% minority interest in the electronics and metallics
subsidiaries and the marketing subsidiary. The increase in minority interest to
$925,000 for the year ended March 31, 2002, from $621,000 for the year ended
March 31, 2001, reflects that the electronics and metallics business generated
more profits in the current year as compared to the prior year.
As a result of the above factors, net income was $13,324,000 for the year ended
March 31, 2002, an increase of $514,000 or 4.0%, as compared to the year ended
March 31, 2001, and net income as a percentage of net sales increased slightly
to 16.0% from 15.8%.
- more -
DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
During the past five years, the Company has relied primarily upon internally
generated funds and short-term borrowings (including trade finance facilities)
to finance its operations and expansion.
As of March 31, 2002, the Company had a working-capital surplus of $54,923,000.
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 of $18,266,000 and the funds from short-term bank loans
of $482,000, exercise of stock options of $243,000 during the year offset by the
cash dividend distributed of $7,229,000 and the capital investment of $4,397,000
during the year ended March 31, 2002.
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 at March 31, 2002.
As of March 31, 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 March 31, 2002, the Company had ( i ) unused credit
facilities of $16,581,000 ( ii ) cash and cash equivalents of $31,534,000 and (
iii ) restricted cash of $2,861,000, which has been pledged as collateral for
those credit facilities. The restricted cash of $2,762,000 and leasehold land
and buildings of $1,348,000 have been pledged as collateral for those credit
facilities. The Company also had $99,000 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: June 6, 2002