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, 2004
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 9, 2004
| Class |
Outstanding at August 9, 2004 | |
| Common Stock, $0.01 Par Value |
12,394,949 |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
(in thousands of United States Dollars, except share and per share data)
| Three Months Ended June 30, |
||||||||||||||
| 2004 |
2003 |
|||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||
| Net Sales |
$ | 17,794 | 100.0 | % | $ | 15,062 | 100.0 | % | ||||||
| Cost of Goods Sold (Note 2) |
12,474 | 70.1 | % | 10,585 | 70.3 | % | ||||||||
| Gross Profit |
5,320 | 29.9 | % | 4,477 | 29.7 | % | ||||||||
| Selling and Marketing expenses (Note 3) |
3,148 | 17.7 | % | 2,782 | 18.5 | % | ||||||||
| General and Administrative expenses |
1,703 | 9.6 | % | 1,542 | 10.2 | % | ||||||||
| Research and Development expenses |
46 | 0.3 | % | 43 | 0.3 | % | ||||||||
| Income from operations |
423 | 2.3 | % | 110 | 0.7 | % | ||||||||
| Other Expenses —net |
(80 | ) | (0.4 | )% | (59 | ) | (0.3 | )% | ||||||
| Interest Income |
33 | 0.2 | % | 50 | 0.3 | % | ||||||||
| Income Before Income Taxes |
376 | 2.1 | % | 101 | 0.7 | % | ||||||||
| Income Tax Expense (Note 4) |
(52 | ) | (0.3 | )% | (179 | ) | (1.2 | )% | ||||||
| Net Income (Loss) |
$ | 324 | 1.8 | % | $ | (78 | ) | (0.5 | )% | |||||
| EARNINGS (LOSSES) PER SHARE (Note 9) |
||||||||||||||
| — Basic |
$ | 0.03 | $ | (0.01 | ) | |||||||||
| — Diluted |
$ | 0.03 | $ | (0.01 | ) | |||||||||
| Weighted Average Number of Shares Outstanding |
||||||||||||||
| — Basic |
12,361,000 | 12,342,000 | ||||||||||||
| — Diluted |
12,772,000 | 12,342,000 | ||||||||||||
(See accompanying notes to Unaudited Condensed Consolidated Financial Statements)
1
Condensed Consolidated Balance Sheets
(in thousands of United States Dollars, except share and per share data)
| June 30, 2004 |
March 31, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 20,156 | $ | 20,303 | ||||
| Accounts receivable—net of allowance for doubtful accounts of $233 at June 30, 2004 and $237 at March 31, 2004 |
12,821 | 12,393 | ||||||
| Inventories (Note 5) |
13,782 | 13,547 | ||||||
| Other receivables, deposits and prepayments |
1,432 | 1,050 | ||||||
| Total Current Assets |
48,191 | 47,293 | ||||||
| Asset to be disposed of by sale (Note 15) |
5,230 | 5,230 | ||||||
| Property, Plant and Equipment—net |
29,301 | 28,246 | ||||||
| Land Use Right |
757 | 761 | ||||||
| Deposits for Acquisition of Property, Plant and Equipment |
15 | 969 | ||||||
| Income taxes receivable (Note 6) |
5,229 | 5,085 | ||||||
| Other deposit (Note 7) |
301 | 301 | ||||||
| TOTAL ASSETS |
$ | 89,024 | $ | 87,885 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 5,508 | $ | 5,064 | ||||
| Accrued payroll and employee benefits |
1,440 | 1,480 | ||||||
| Accrued other expenses |
1,212 | 1,168 | ||||||
| Income taxes payable |
5,860 | 5,858 | ||||||
| Total Current Liabilities |
14,020 | 13,570 | ||||||
| Deferred Income Taxes |
1,720 | 1,670 | ||||||
| Total Liabilities |
15,740 | 15,240 | ||||||
| Commitments and Contingencies (Note 13) |
||||||||
| Shareholders’ Equity: |
||||||||
| Common stock, $0.01 par value; authorized 100,000,000 shares; issued and outstanding 12,382,825 shares at June 30, 2004, and 12,312,691 shares at March 31, 2004 |
124 | 123 | ||||||
| Additional paid-in capital |
26,989 | 26,702 | ||||||
| Retained earnings |
47,346 | 47,022 | ||||||
| Accumulated other comprehensive loss |
(1,175 | ) | (1,202 | ) | ||||
| Total shareholders’ equity |
73,284 | 72,645 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 89,024 | $ | 87,885 | ||||
(See accompanying notes to Unaudited Condensed Consolidated Financial Statements)
2
Condensed Consolidated Statements of Cash Flows
(in thousands of United States Dollars)
| Three Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating activities: |
||||||||
| Net income (loss) |
$ | 324 | $ | (78 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
1,679 | 1,545 | ||||||
| Deferred income taxes |
50 | 157 | ||||||
| Loss on disposal/write-off of property, plant and equipment |
29 | 59 | ||||||
| Allowance for doubtful accounts |
(4 | ) | (41 | ) | ||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(424 | ) | (602 | ) | ||||
| Inventories |
(235 | ) | (2 | ) | ||||
| Other receivables, deposits and prepayments |
(382 | ) | 219 | |||||
| Income taxes receivable |
(144 | ) | (685 | ) | ||||
| Accounts payable-trade |
938 | 1,155 | ||||||
| Accrued payroll, employee benefits and other expenses |
4 | (132 | ) | |||||
| Income taxes payable |
2 | 19 | ||||||
| Net cash provided by operating activities |
1,837 | 1,614 | ||||||
| Investing activities: |
||||||||
| Acquisition of property, plant and equipment |
(3,253 | ) | (1,113 | ) | ||||
| Proceeds on disposal of property, plant and equipment |
— | 12 | ||||||
| Decrease (Increase) in deposits for acquisition of property, plant and equipment |
954 | (56 | ) | |||||
| Net cash used in investing activities |
(2,299 | ) | (1,157 | ) | ||||
| Financing activities: |
||||||||
| Proceeds from issuance of common stock |
288 | 55 | ||||||
| Payment for repurchase of common stock |
— | (2,416 | ) | |||||
| Net cash provided by (used in) financing activities |
288 | (2,361 | ) | |||||
| Net decrease in cash and cash equivalents |
(174 | ) | (1,904 | ) | ||||
| Cash and cash equivalents at beginning of period |
20,303 | 25,928 | ||||||
| Effects of exchange rate changes on cash and cash equivalents |
27 | (30 | ) | |||||
| Cash and cash equivalents at end of period |
$ | 20,156 | $ | 23,994 | ||||
| Supplemental cash flow information: |
||||||||
| Cash paid during the period |
||||||||
| Interest |
$ | — | $ | — | ||||
| Income taxes |
144 | 689 | ||||||
(See accompanying notes to Unaudited Condensed Consolidated Financial Statements)
3
Notes to Condensed Consolidated Financial Statements
(in thousands of United States Dollars, except share and per share data, unaudited)
(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 and disk drive 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, Malaysia, Singapore, Taiwan, and the United States of America.
The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intra-group balances and transactions have been eliminated on consolidation.
The accompanying condensed consolidated financial information has been prepared by the Company without being audited, in accordance with the instructions to Form 10-Q and therefore do not include all the information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America.
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 they become known.
The unaudited condensed 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. These condensed consolidated financial statements and notes thereto should be read together with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2004.
(2) Cost of goods sold
Included therein was $58 (unaudited) (2003-$46, unaudited) write-off of machinery and molds due to technological obsolescence and capacity under-utilization for the three months ended June 30, 2004.
(3) Delivery and freight expenses
For the three months ended June 30, 2004, the Company incurred delivery and freight expenses of approximately $894 (unaudited) (2003—$751, unaudited), which have been included as part of selling and marketing expenses.
(4) Income Tax Expense
Income is subject to taxation in the various countries in which the Company and its subsidiaries operate. In June 2003, the Hong Kong Legislative Council passed a bill increasing the Hong Kong corporate tax rate from 16.0% to 17.5%. The Company revalued its deferred tax liabilities at this new rate and the impact was a $146 charge to income tax expense in the first quarter of fiscal 2004.
(5) Inventories
| June 30, 2004 |
March 31, 2004 | |||||
| (Unaudited) | ||||||
| Raw materials |
$ | 7,138 | $ | 7,332 | ||
| Finished goods |
6,644 | 6,215 | ||||
| $ | 13,782 | $ | 13,547 | |||
4
Notes to Condensed Consolidated Financial Statements—(continued)
(in thousands of United States Dollars, except share and per share data, unaudited)
(6) Income Taxes Receivable
This represents approximately $5,205 of tax reserve certificates purchased from the Inland Revenue Department (“IRD”) of Hong Kong in respect of prior year taxes that are under examination by the IRD. The placement of such certificates is a condition stipulated by the IRD.
There has been no change in the tax filing status of our Hong Kong subsidiaries since March 31, 2004.
(7) Other Deposit
This represents the security bond placed at a Taiwanese court in order to obtain an anti-injunction order in respect of a potential patent dispute in Taiwan. See Note 13(a) “Litigation”. Management of the Company does not expect the case to be settled within 12 months and therefore the amount was classified as a non-current asset.
(8) Stock Options
Option activity relating to the Company’s stock option plan is summarized as follows (unaudited):
| Outstanding Options | ||||||
| Number of Shares |
Weighted average exercise price per share | |||||
| Outstanding at April 1, 2004 |
2,810,313 | $ | 5.99 | |||
| Granted |
396,420 | 5.10 | ||||
| Exercised |
(58,210 | ) | 3.96 | |||
| Forfeited |
(49,900 | ) | 7.93 | |||
| Outstanding at June 30, 2004 |
3,098,623 | 5.88 | ||||
| Outstanding Options | ||||||
| Number of Shares |
Weighted average exercise price per share | |||||
| Outstanding at April 1, 2003 |
3,537,459 | $ | 5.96 | |||
| Granted |
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