-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KZkzxwfDWE3t6YqzZXorE7C8yZO+QXWc89YJsRVjo3Av746TepxtEi9WwnY7Rd+p SQRkbkAHc+O5LNjKhqIcPw== 0000923168-99-000052.txt : 19990927 0000923168-99-000052.hdr.sgml : 19990927 ACCESSION NUMBER: 0000923168-99-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAM SW INC CENTRAL INDEX KEY: 0001030860 STANDARD INDUSTRIAL CLASSIFICATION: JEWELRY, PRECIOUS METAL [3911] IRS NUMBER: 621563911 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22049 FILM NUMBER: 99716413 BUSINESS ADDRESS: STREET 1: UNIT 25 32 2ND FLOOR BLOCK B FOCAL IND C STREET 2: MAN LOK STREET CITY: HUNGHOM, HONG KONG STATE: K3 ZIP: 12345 BUSINESS PHONE: 0118522766 MAIL ADDRESS: STREET 1: UNIT 25 32 2ND FLOOR BLOCK B FOCAL IND C STREET 2: MAN LOK STREET CITY: KOWLOON, HONG KONG STATE: K3 10-Q 1 10-Q 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, 1999 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 No. 0-22049 S.W. LAM, INC. (Exact name of registrant as specified in its charter) Nevada 62-1563911 - --------------------------------- --------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) Unit 25-32, 2nd Floor, Block B, Focal Industrial Centre 21 Man Lok Street, Hunghom, Hong Kong ---------------------------------------------------------- (Address of principal executive offices) (852) 2766 3688 -------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------- (Former name, former address and formal fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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 As of June 30, 1999, 12,800,000 shares of Common Stock of the issuer were outstanding. S.W. LAM, INC. AND SUBSIDIARIES ------------------------------- INDEX Page Number --------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - March 31, 1999 and June 30, 1999 .............................................. 1 Consolidated Statements of Operations - For the three months ended June 30, 1998 and June 30, 1999................ 2 Consolidated Statements of Cash Flows - For the three months ended June 30, 1998 and June 30, 1999................ 3 Notes to Consolidated Financial Statements.................. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 5 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K............................... 8 SIGNATURES................................................................. 9 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements S.W. LAM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (US$,000) (Unaudited) March 31, June 30, ASSETS 1999 1999 ----------- --------- Current assets: Cash and cash equivalents $ 16,702 $ 16,087 Accounts receivable, net 15,655 17,241 Inventory 16,970 19,956 Prepayments and other current assets 599 1,200 ------- -------- Total current assets 49,926 54,484 Property, plant and equipment, and capital leases, net 23,772 24,227 ------- -------- Total assets $73,698 $78,711 ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term bank borrowings $ 16,525 $ 19,336 Long-term bank loans, current portion 363 358 Capital lease obligations, current portion 1,224 1,386 Accounts payable 3,437 3,027 Accrued liabilities 861 1,211 Dividend payable 1,849 971 Income tax payable 7,562 8,099 Due to director 400 400 ------- -------- Total current liabilities 32,221 34,788 Long-term bank loans, non-current portion 1,083 999 Capital lease obligations, non current portion 997 887 Deferred taxation 1,283 1,283 ------- ------- Total liabilities 35,584 37,957 ------- ------- Minority interest 17,980 19,217 ------- ------- Stockholders' Equity: Preferred stock 0 0 Common stock 13 13 Additional paid-in capital 511 511 Retained earnings 19,610 21,013 ------- ------- Total stockholders' equity 20,134 21,537 ------- ------- Total liabilities and stockholders' equity $73,698 $78,711 ======= ======= The accompanying notes are an integral part of these financial statements 1 S.W. LAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (US$,000, except per share data) (Unaudited) Three Months Ended June 30, --------------------------- 1998 1999 ----------- ---------- Total revenues $ 16,482 $ 24,524 Cost of sales and services (12,600) (17,758) --------- ---------- Gross profit 3,882 6,766 Selling, general and administrative expenses (1,354) (3,311) --------- ---------- Operating income 2,528 3,455 --------- ---------- Other income (expense), net: Interest expenses (338) (456) Interest income 66 157 Other income 20 6 --------- ---------- Total other income (expense), net (252) (293) --------- ---------- Income before income taxes and minority interest 2,276 3,162 Provision for income taxes (413) (522) --------- ---------- Income before minority interest 1,863 2,640 Minority interest - (1,237) --------- ---------- Net income $ 1,863 $ 1,403 ========= ========== Basic income per share $ 0.15 $ 0.11 ========= ========== Weighted average shares outstanding 12,800,000 12,800,000 =========== ============ The accompanying notes are an integral part of these consolidated financial statements 2 S.W. LAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (US$,000) (Unaudited) Three Months Ended June 30, ---------------------------- 1998 1999 -------- --------- Cash flows from operating activities: Net income $ 1,863 $ 1,403 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 290 1,410 Minority interest 0 1,237 (Increase) Decrease in operating assets: Accounts receivable, net 147 (1,586) Inventories (757) (2,986) Prepayments and other current assets (860) (601) Due from a director (454) 0 (Decrease) Increase in operating liabilities: Accounts payable (357) (410) Deposits from customers 191 0 Accrued liabilities (249) 350 Income taxes payable 412 537 ------ ------ Net cash provided by (used in) operating activities 226 (646) ------ ------ Cash flows from investing activities: Additions to property, plant and equipment (774) (1,865) ------ ------ Net cash used in investing activities (774) (1,865) ------ ------ Cash flows from financing activities: Net proceeds from issuance of preference share by a subsidiary 10,000 0 Payment of dividends 0 (878) Net (decrease) increase in short-term bank borrowings 3,399 2,811 Net (decrease) increase in convertible short-term loan (10,000) 0 Additions of capital lease obligations 2,138 375 Repayment of capital element of capital lease obligations (2,482) (323) Repayment of long-term bank loans (19) (89) ------ ------ Net cash provided by financing activities 3,036 1,896 ------ ------ Effect of exchange rate changes in cash 26 0 ------ ------ Net increase (decrease) in cash and cash equivalents 2,514 (615) Cash and cash equivalents, as of beginning of period 2,094 16,702 ------ ------ Cash and cash equivalents, as of end of period $ 4,608 $16,087 ====== ======
The accompanying notes are an integral part of these consolidated financial statements 3 S.W. LAM, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 1999 1. INTERIM PRESENTATION The interim consolidated financial statements are prepared pursuant to the requirements for reporting on Form 10-Q. These statements include the accounts of S.W. Lam, Inc. (the "Company") and all of its wholly owned and majority owned subsidiary companies. The March 31, 1999 balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company's Form 10-K for the year ended March 31, 1999. In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full year ending March 31, 2000. 2. CURRENCY PRESENTATION AND FOREIGN CURRENCY TRANSLATION The translation of the financial statements of group companies into United States Dollars is performed for balance sheet accounts using closing exchange rates in effect at the balance sheet date and for revenue and expense accounts using average exchange rate during each reporting period. The gains or losses resulting from translation are included in shareholders equity separately as cumulative translation adjustments. 4 Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of Securities Exchange Act of 1934. Statements contained herein which are not historical facts are forward-looking statements that involve risks and uncertainties. All phases of the Company's operations are subject to a number of uncertainties, risks and other influences. Therefore, the actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors which could cause the actual results to differ materially are the risks and uncertainties described both in this Form 10-Q and the risks, uncertainties and other factors set forth from time to time in the Company's other public reports, filings and public statements. Many of these factors are beyond the control of the Company, any of which, or a combination of which, could materially affect the results of the Company's operations and whether the forward-looking statements made by the company ultimately prove to be accurate. Results of Operations The following table sets forth, for the periods indicated, certain items from the Consolidated Statements of Operations expressed as a percentage of total revenues. Three Months Ended June 30, 1998 1999 Total revenues 100.0% 100.0% Cost of sales 76.4 72.4 Gross profit 23.6 27.6 Operating expenses 8.2 13.5 Income from operations 15.3 14.1 Other income (expense), net (1.5) (1.2) Income before income taxes and minority interest 13.8 12.9 Income taxes 2.5 2.1 Income before minority interest 11.3 10.8 Minority interest 0.0 5.1 Net income 11.3 5.8 Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998 Revenues and Gross Profit. Total revenues increased $8 million, or 48.8%, to $24.5 million for the three months ended June 30, 1999 from $16.5 million for the three months ended June 30, 1998. Sales of Company products were up 53.2% to $24.5 million during the current period compared to $16 million during the same period in the prior fiscal year. Subcontracting fees decreased from $0.5 million during the quarter ended June 30, 1998 to $0 during the quarter ended June 30, 1999. 5 The increase in sales for the period was attributable to expansion of production facilities to meet increasing demand, new product design and increased marketing efforts. The decrease in subcontracting fees for the period was attributable to concentration on the manufacturing of products designed by the Group as opposed to products manufactured on a subcontract basis in order to raise the Group's brand name recognition. Geographically, within Southeast Asia (including Hong Kong and the PRC) the Company's sales increased 7.5% to $8.6 million during the three months ended June 30, 1999 from $8 million during the same period in the prior year. Sales within Southeast Asia accounted for 35% of total sales during the current period as compared to 50% during the same period in the prior year. Sales within the region increased due to improving economic conditions in Southeast Asia during the period following an extended period of weakness from late 1997 to early 1999. Sales in Hong Kong increased approximately 71.4% to $2.4 million for the three months ended June 30, 1999 from $1.4 million for the same period of the prior year. Sales in the PRC were unchanged, at $3.7 million for the three months ended June 30, 1999 and for the three months ended June 30, 1998. Sales in Southeast Asia (not including Hong Kong and the PRC) during the three months ended June 30, 1999 decreased 10.3% to $2.5 million from $2.9 million for the same period in the prior year. The decrease in sales in Southeast Asia, excluding Hong Kong and the PRC, was attributable to a decrease in orders from the region. Outside of Asia (in the United States, Europe and the Middle East), the Company experienced a 99.2% increase in sales with these sales accounting for 65% of total sales in the three months ended June 30, 1999 as compared to 50% of total sales in the same period of the prior year. The increase in sales outside of Asia was driven by increased marketing efforts and strong product demand which accompanied strong economic conditions in those regions. Sales in Europe increased approximately 73.7% to $6.6 million for the three months ended June 30, 1999 from $3.8 million in the same period of the prior year. Sales in the Middle East were up during the three months ended June 30, 1999, increasing approximately 11.1% to $2.0 million from $1.8 million in the same period of the prior year. Sales in the United States increased approximately 187.5% to $6.9 million during the three months ended June 30, 1999 from $2.4 million in the same period of the prior year. Gross profits increased by 74.3% to $6.8 million during the current period from $3.9 million during the same period in the prior fiscal year. The increase in gross profits was mainly attributable to the increase in net sales. Gross margins increased to 27.6% in the current period from 23.6% in the prior fiscal year period. The increase in gross profit percentage during the current period was primarily attributable to increased sales of higher margin products and improved economies of scale associated with increased production. Operating Expenses. Operating expenses totaled $3.3 million during the current period, an increase of 145% from $1.4 million during the same period in the prior fiscal year. The increase in operating expenses during the period was primarily attributable to an increase in staff and depreciation expense to support increased business operations. 6 Other Income (Expense), Net. Other expenses, net of other income, increased during the current period to $293,000 from $252,000 in the same period during the prior year. The increase in net other expenses was attributable to an increase in interest expense of $118,000 and a decrease in other income of $14,000 which was partially offset by an increase in interest income of $91,000. The increase in interest expense is attributable to an increase in trust receipt bank loans. Income Taxes. Income taxes increased by 26.4% to $522,000 during the current period from $413,000 during the same period in the prior year. The increase in income taxes during the period was primarily attributable to increased income. Minority Interest. Minority interest of $1.2 million was reported during the current period. No minority interest was reported during the prior year period. Minority interest reflects the group reorganization to accommodate the listing of shares of the Company's previously indirect wholly-owned subsidiary, Hang Fung Gold Technology Limited ("Hang Fung Gold") on The Stock Exchange of Hong Kong Limited in Hong Kong, including the subscription by Phenomenal Limited, an independent third party, for shares in Hang Fung Gold, and the Hong Kong public offering pursuant to which additional shares of Hang Fung Gold were sold. Minority interest reflects the proportionate interest in the earnings of the Hang Fung Group not owned by the Company. Financial Condition, Liquidity and Capital Resources The Company had a cash balance of $16.1 million and working capital of $19.7 at June 30, 1999 compared to a cash balance of $16.7 million and working capital of $17.7 million at March 31, 1999. The increase in working capital was attributable to net income during the period and normal changes in current assets and liabilities. For the three months ended June 30, 1999 net cash used in operating activities amounted to $0.6 million as compared to net cash provided by operating activities of $0.2 million for the corresponding period of the prior year. This change resulted primarily from a combination of increased net income before minority interest of $0.8 million and an increase in depreciation expense of $1.1 million which was offset by a substantial increase in inventories of $3.0 million and receivables of $1.6 million. Net cash used in investing activities totoled $1.8 million during the three months ended June 30, 1999 compared with $0.8 million during the three months ended June 30, 1998. This increase was attributable to an increase in acquisition of machinery and equipment during the current period to support expanded operations. Net cash provided by financing activities decreased to $1.9 million during the three months ended June 30, 1999 from $3 million during the three months ended June 30, 1998. This decrease was attributable to payment during the three months ended June 30, 1999 of dividends accrued and payable at March 31, 1999 and a reduction in the amount of short-term bank borrowings incurred during the current period as compared to the prior year period. 7 At June 30, 1999, the Company had long term debt totaling $3.2 million compared to long term debt at March 31, 1999 of $3.4 million. The decrease in long term debt was primarily attributable to the repayment of bank loans and capital lease obligations while less long term bank loan was acquired during the three months ended June 30, 1999. Management believes that based on its current financial condition, the Company's cash and working capital is sufficient to meet the Company's anticipated needs for at least the next twelve months. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K None 8 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. S.W. LAM, INC. Dated: September 24, 1999 By: /s/ Lam Sai Wing -------------------------------- Lam Sai Wing, President and Chief Executive Officer Dated: September 24, 1999 By: /s/ Chan Yam Fai, Jane -------------------------------- Chan Yam Fai, Jane Chief Financial Officer 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-mos Mar-31-2000 Apr-01-1999 Jun-30-1999 16,087 0 17,241 0 19,956 54,484 24,227 0 78,711 34,788 0 0 0 13 21,524 78,711 24,524 24,524 17,758 17,758 3,311 0 456 3,162 522 1,403 0 0 0 1,403 0.11 0.11
-----END PRIVACY-ENHANCED MESSAGE-----