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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission File Number 0-29332
 
 
PEAK INTERNATIONAL LIMITED
(Exact name of registrant as specified in its charter)
 
Incorporated in Bermuda with limited liability
  
None
(State or other jurisdiction of incorporation or
organization)
  
(I.R.S. Employer Identification Number)
44091 Nobel Drive, P.O. Box 1767,
Fremont, California
  
94538
(Address of principal executive offices)
  
(Zip Code)
 
(510) 449-0100
(Registrant’s telephone number)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x     No  ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 31, 2002.
 
Class
  
Outstanding at July 31, 2002
Common Stock, $0.01 Par Value
  
12,689,762
 

PART I
FINANCIAL INFORMATION
 
Item
 
1.     Financial Statements
 
Consolidated Statements of Operations
(in thousands of United States Dollars, except per share data)
 
    
Three Months Ended
June 30,
  
    
2002
     
2001
  
    
(Unaudited)
     
(Unaudited)
  
Net Sales:
                  
—   Third parties
   
$
13,220
 
   
$
10,737
 
—   Related companies
   
 
—  
 
   
 
658
 
    
 
13,220
 
   
 
11,395
 
Cost of Goods Sold (Note 2)
   
 
10,024
 
   
 
9,156
 
Gross Profit
   
 
3,196
 
   
 
2,239
 
General and Administrative
   
 
2,122
 
   
 
2,523
 
Research and Development
   
 
34
 
   
 
52
 
Selling and Marketing
   
 
2,228
 
   
 
2,131
 
Asset Impairment (Note 11)
   
 
10,484
 
   
 
—  
 
Operating Loss
   
 
(11,672
)
   
 
(2,467
)
Other Income (Expense)—  net
   
 
43
 
   
 
(92
)
Interest Income
   
 
97
 
   
 
290
 
Loss Before Tax
   
 
(11,532
)
   
 
(2,269
)
Income Tax (Expense) Benefit
   
 
(5
)
   
 
78
 
Net Loss
   
$
(11,537
)
   
$
(2,191
)
Loss Per Share
                  
—   Basic
   
$
(0.91
)
   
$
(0.16
)
—   Diluted
   
$
(0.91
)
   
$
(0.16
)
Weighted Average Number of Shares
                  
—   Basic
   
 
12,678
 
   
 
13,358
 
—   Diluted
   
 
12,678
 
   
 
13,358
 
 
(See accompanying notes to Consolidated Financial Statements)
 
 

-2-

Consolidated Balance Sheets
(in thousands of United States Dollars)
 
    
June 30, 2002
     
March 31, 2002
  
    
(Unaudited)
         
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
28,294
 
   
$
29,217
 
Accounts receivable—net of allowance for doubtful accounts of $271 at June 30, 2002 and $241 at March 31, 2002
   
 
9,832
 
   
 
8,200
 
Inventories—net (Note 3)
   
 
12,970
 
   
 
12,325
 
Other receivables, deposits and prepayments
   
 
1,394
 
   
 
1,396
 
Income taxes receivable
   
 
761
 
   
 
156
 
Total Current Assets
   
 
53,251
 
   
 
51,294
 
Asset to be disposed of by sale (Note 11)
   
 
8,124
 
   
 
—  
 
Fixed assets:
                  
Deposits for Acquisition of Property, Plant and Equipment
   
 
150
 
   
 
67
 
Land Use Rights
   
 
796
 
   
 
1,967
 
Property, Plant and Equipment—net
   
 
31,001
 
   
 
50,488
 
Total Fixed Assets
   
 
31,947
 
   
 
52,522
 
TOTAL
   
$
93,322
 
   
$
103,816
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current Liabilities:
                  
Accounts payable:
                  
—   Trade
   
$
4,027
 
   
$
2,493
 
—   Property, plant and equipment
   
 
179
 
   
 
705
 
Accrued payroll and employee benefits
   
 
1,148
 
   
 
1,021
 
Accrued other expenses
   
 
1,516
 
   
 
1,614
 
Income taxes payable
   
 
5,428
 
   
 
5,424
 
Total Current Liabilities
   
 
12,298
 
   
 
11,257
 
Deferred Income Taxes
   
 
1,772
 
   
 
1,777
 
Total Liabilities
   
 
14,070
 
   
 
13,034
 
Commitments and Contingencies (Note 9)
                  
Stockholders’ Equity:
                  
Common stock
   
 
127
 
   
 
127
 
Additional paid-in capital
   
 
28,050
 
   
 
27,968
 
Retained earnings
   
 
52,247
 
   
 
63,784
 
Accumulated other comprehensive loss
   
 
(1,172
)
   
 
(1,097
)
Total stockholders’ equity
   
 
79,252
 
   
 
90,782
 
TOTAL
   
$
93,322
 
   
$
103,816
 
 
(See accompanying notes to Consolidated Financial Statements)
 
 

-3-

Consolidated Statements of Cash Flows
(in thousands of United States Dollars)
 
    
Three Months Ended June 30,
  
    
2002
     
2001
  
    
(Unaudited)
     
(Unaudited)
  
Operating activities:
                  
Net loss
   
$
(11,537
)
   
$
(2,191
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
                  
Depreciation and amortization
   
 
1,617
 
   
 
1,529
 
Deferred income taxes
   
 
(5
)
   
 
(74
)
Loss on write-off/disposal of property, plant and equipment
   
 
433
 
   
 
17
 
Allowance for doubtful accounts
   
 
30
 
   
 
(24
)
Asset impairment
   
 
10,484
 
   
 
—  
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
(1,662
)
   
 
1,207
 
Inventories
   
 
(645
)
   
 
644
 
Other receivables, deposits and prepayments
   
 
2
 
   
 
(3
)
Income taxes receivable
   
 
(605
)
   
 
1
 
Accounts payable-trade
   
 
1,534
 
   
 
(415
)
Accrued payroll and other expenses
   
 
29
 
   
 
112
 
Amounts due from related companies
   
 
—  
 
   
 
7
 
Income taxes payable
   
 
4
 
   
 
(4
)
Net cash (used in) provided by operating activities
   
 
(321
)
   
 
806
 
Investing activities:
                  
Acquisition of property, plant and equipment
   
 
(517
)
   
 
(751
)
Increase in deposits for acquisition of property, plant and equipment
   
 
(83
)
   
 
(26
)
Net cash used in investing activities
   
 
(600
)
   
 
(777
)
Financing activities:
                  
Payment for TrENDS
   
 
—  
 
   
 
(3,080
)
Payment for share buyback
   
 
—  
 
   
 
(1,316
)
Proceeds from issue of common stock
   
 
82
 
   
 
150
 
Net cash provided by (used in) financing activities
   
 
82
 
   
 
(4,246
)
Net decrease in cash and cash equivalents
   
 
(839
)
   
 
(4,217
)
Cash and cash equivalents at beginning of period
   
 
29,217
 
   
 
33,901
 
Effects of exchange rate changes on cash
   
 
(84
)
   
 
90
 
Cash and cash equivalents at end of period
   
$
28,294
 
   
$
29,774
 
Supplemental cash flow information:
                  
Cash paid during the period
                  
Interest
   
$
—  
 
   
$
—  
 
Income tax
   
 
612
 
   
 
—  
 
 
(See accompanying notes to Consolidated Financial Statements)
 

-4-

Notes to Consolidated Financial Statements
(in thousands of United States Dollars, except per share data)
 
(1)
 
Organization and basis of presentation
 
Peak International Limited (the “Company”) was incorporated as an exempted company with limited liability in Bermuda under the Companies Act 1981 of Bermuda (as amended) on January 3, 1997. The subsidiaries of the Company are principally engaged in the manufacture and sale of precision engineered packaging products, such as matrix trays, shipping tubes, reels and carrier tapes, leadframe boxes and interleaves used in the storage and transportation of semiconductor devices and other electronic components. The Company’s principal production facilities are located in the People’s Republic of China (the “PRC”) and the Company maintains offices in Hong Kong, the United States of America, Singapore, Malaysia, the PRC, Taiwan and the Philippines.
 
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its subsidiaries. All significant intra-group balances and transactions have been eliminated on consolidation.
 
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results could differ from those estimates. Differences from those estimates are reported in the period when they become known.
 
The unaudited consolidated financial statements reflect all adjustments (including normal recurring adjustments) which in the opinion of management are required for a fair presentation of the Company’s interim results. The results for interim periods are not necessarily indicative of the results that may be achieved in the entire year.
 
(2)
 
Cost of Goods Sold
 
Included therein was $432 (unaudited) write-off of machinery, molds and tooling due to technological obsolescence and capacity under-utilization for the quarter ended June 30, 2002.
 
(3)
 
Inventories
 
    
June 30, 2002
   
March 31, 2002
    
(Unaudited)
     
Raw materials
   
$
7,164
   
$
7,463
Finished goods
   
 
5,806
   
 
4,862
    
$
12,970
   
$
12,325
 
(4)
 
Statement of Comprehensive Loss
    
Three Months Ended June 30,
  
    
2002
     
2001
  
    
(Unaudited)
         
Net Loss
   
$
(11,537
)
   
$
(2,191
)
Foreign currency translation adjustment
   
 
(75
)
   
 
94
 
    
$
(11,612
)
   
$
(2,097
)
 
(5)
 
Stock Options
 
Option activity relating to the Company’s stock option plan for the quarters ended June 30 ,2002 and 2001 are summarized as follows (unaudited):
 
 

-5-

 
    
Outstanding Options
    
Number of
Shares
     
Weighted
average exercise
price per share
Outstanding at April 1, 2002
   
2,686,894
 
   
$
7.29
Granted
   
110,000
 
   
 
8.03
Exercised
   
(2,000
)
   
 
3.66
Forfeited
   
(132,511
)
   
 
9.01
Outstanding at June 30, 2002
   
2,662,383
 
   
 
7.24
 
    
Outstanding Options
    
Number of
Shares
     
Weighted
average exercise
price per share
Outstanding at April 1, 2001
   
2,498,593
 
   
$
7.67
Exercised
   
(2,083
)
   
 
5.38
Forfeited
   
(73,149
)
   
 
8.09
Outstanding at June 30, 2001
   
2,423,361