-----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, QRpThFGD7Zae7zOjn5UnZ8aQELE1o9RHKKBrmmvbnwf/lpgmGYWZu3YglEAELloH tqsWc6TolwM7CnWI3h/XoA== 0001026700-00-000027.txt : 20000215 0001026700-00-000027.hdr.sgml : 20000215 ACCESSION NUMBER: 0001026700-00-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 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: 541744 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 December 31, 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 December 31, 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 December 31, 1999.......................................... 1 Consolidated Statements of Operations - For the three months and nine months ended December 31, 1998 and 1999.............................................. 2 Consolidated Statements of Cash Flows - For the nine months ended December 31, 1998 and 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...................... 10 SIGNATURES.............................................................. 11 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements S.W. LAM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (US$,000) (Unaudited) March 31, December 31, 1999 1999 -------- ----------- ASSETS Current assets: Cash and cash equivalents $ 16,702 $ 16,358 Accounts receivable, net 15,655 19,594 Inventories 16,970 26,936 Prepayments and other current assets 599 544 ------- ------- Total current assets 49,926 63,432 Property, plant and equipment, and capital leases, net 23,772 27,573 ------- ------- Total assets $73,698 $91,005 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term bank borrowings $ 16,525 $ 26,748 Long-term bank loans, current portion 363 367 Capital lease obligations, current portion 1,224 1,788 Accounts payable 3,437 2,763 Accrued liabilities 861 915 Dividend payable 1,849 0 Income tax payable 7,562 9,028 Due to a director 400 359 ------- ------- Total current liabilities 32,221 41,968 Long-term bank loans, non-current portion 1,083 809 Capital lease obligations, non current portion 997 1,230 Deferred taxation 1,283 1,283 ------- ------- Total liabilities 35,584 45,290 ------- ------- Minority interest 17,980 21,557 ------- ------- Stockholders' Equity: Preferred stock 0 0 Common stock 13 13 Additional paid-in capital 511 511 Retained earnings 19,610 23,634 ------- ------- Total stockholders' equity 20,134 24,158 ------- ------- Total liabilities and stockholders' equity $73,698 $91,005 ======= ======= The accompanying notes are an integral part of these consolidated financial statements 1 S.W. LAM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (US$,000, except per share data) (Unaudited) Three Months Ended Nine Months Ended December 31, December 31, -------------------- --------------------- 1998 1999 1998 1999 ---- ---- ---- ---- Total revenues $ 28,331 $ 31,258 $ 60,990 $ 84,823 Cost of sales and services (21,375) (23,399) (45,730) (63,944) -------- ------- ------- ------- Gross profit 6,956 7,859 15,260 20,879 Selling, general and administrative expenses (2,252) (3,992) (6,440) (10,818) -------- ------- ------- ------- Operating income 4,704 3,867 8,820 10,061 -------- ------- ------- ------- Other income (expense), net: Interest expense (403) (568) (1,118) (1,593) Interest income 134 228 309 542 Other income (expense) (51) 13 (129) 45 Total other -------- ------- ------- ------- (expense), net (320) (327) (938) (1,006) -------- ------- ------- ------- Income before income taxes and minority interest 4,384 3,540 7,882 9,055 Provision for income taxes (702) (577) (1,265) (1,454) -------- ------- ------- ------- Income before minority interest 3,682 2,963 6,617 7,601 Minority interest - (1,394) - (3,577) -------- ------- ------- ------- Net income before dividends 3,682 1,569 6,617 4,024 Dividends - redeemable preferred stock (493) - (1,538) - -------- ------- ------- ------- Net income attributable to common stock $ 3,189 $ 1,569 $ 5,079 $ 4,024 ======== ======= ======= ======= Basic income per share $ 0.25 $ 0.12 $ 0.40 $ 0.31 ======== ======= ======= ======= Weighted average shares outstanding 12,800,000 12,800,000 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) Nine Months Ended December 31, ---------------------- 1998 1999 ------ ------ Cash flows from operating activities: Net income $ 5,079 $ 4,024 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 3,394 5,276 Minority interest 0 3,577 Redeemable preferred stock dividends 1,538 0 (Increase) Decrease in operating assets: Accounts receivable, net (7,112) (3,939) Inventories (1,762) (9,966) Prepayments and other current assets (263) 55 Due to a director (775) (41) (Decrease) Increase in operating liabilities: Accounts payable 122 (674) Accrued liabilities 197 54 Income taxes payable 1,249 1,466 ------- ------ Net cash (used in) provided by operating activities 1,667 (168) ------- ------ Cash flows from investing activities: Additions to property, plant and equipment (4,270) (9,077) ------- ------ Net cash used in investing activities (4,270) (9,077) ------- ------ Cash flows from financing activities: Net proceeds from issuance of preference share by a subsidiary 10,000 0 Payment of preferred stock dividends 0 (1,849) Net increase in short-term bank borrowings 6,844 10,223 Repayment of convertible short-term loan (10,000) 0 Additions of capital lease obligations 2,495 1,934 Repayment of capital element of capital lease obligations (3,005) (1,137) Additions of long-term bank loans 258 258 Repayment of long-term bank loans (237) (528) ------- ------ Net cash provided by financing activities 6,355 8,901 ------- ------ Effect of exchange rate changes in cash 23 0 ------- ------ Net (decrease) increase in cash and cash equivalents 3,775 (344) Cash and cash equivalents, as of beginning of period 2,094 16,702 ------- ------ Cash and cash equivalents, as of end of period $ 5,869 $16,358 ======= ====== 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) December 31, 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 (together the "Group"). 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 Nine Months Ended December 31, December 31, ------------------- ------------------ 1998 1999 1998 1999 ---- ----- ----- ----- Total revenues 100.0% 100.0% 100.0% 100.0% Cost of sales 75.4 74.9 75.0 75.4 Gross profit 24.6 25.1 25.0 24.6 Operating expenses 7.9 12.8 10.6 12.8 Income from operations 16.6 12.4 14.5 11.9 Other income (expense), net (1.1) (1.0) (1.5) (1.2) Income before income taxes and minority interest 15.5 11.3 12.9 10.7 Income taxes 2.5 1.8 2.1 1.7 Income before minority interest 13.0 9.5 10.8 9.0 Minority interest n.a. 4.5 n.a. 4.2 Net income before dividends 13.0 5.0 10.8 4.7 Preferred stock dividends 1.7 0.0 2.5 0.0 Net income on common stock 11.3 5.0 8.3 4.7 Quarter Ended December 31, 1999 Compared to Quarter Ended December 31, 1998 Revenues and Gross Profit. Total revenues increased $2.9 million, or 10.3%, to $31.3 million for the three months ended December 31, 1999 from $28.3 million for the three months ended December 31, 1998. Sales of Company products were up 13.7% to $31.3 million during the current period compared to $27.5 million during the same period in the prior fiscal year. Subcontracting fees decreased from $0.8 million during the quarter ended December 31, 1998 to $0 during the quarter ended December 31, 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 17.1% to $14.4 million during the three months ended December 31, 1999 from $12.3 million during the same period in the prior year. Sales within Southeast Asia accounted for 46% of total sales during the current period as compared to 44.7% 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 24% to $3.1 million for the three months ended December 31, 1999 from $2.5 million for the same period of the prior year. Sales in the PRC decreased approximately 6.3% to $5.9 million for the three months ended December 31, 1999 from $6.3 million for the same period of the prior year. Sales in Southeast Asia (not including Hong Kong and the PRC) during the three months ended December 31, 1999 increased 51.4% to $5.3 million from $3.5 million for the same period in the prior year. Outside of Asia (in the United States, Europe and the Middle East), the Company experienced a 11.2% increase in sales with these sales accounting for 54% of total sales in the three months ended December 31, 1999 as compared to 55.3% of total sales in the same period of the prior year. The increase in sales outside of Asia was attributable to increased production capacity, increased marketing efforts and strong product demand which accompanied strong economic conditions in those regions. Sales in Europe increased approximately 19% to $7.5 million for the three months ended December 31, 1999 from $6.3 million in the same period of the prior year. Sales in the Middle East were up during the three months ended December 31, 1999, increasing approximately 3.3% to $3.1 million from $3 million in the same period of the prior year. Sales in the United States increased approximately 6.8% to $6.3 million during the three months ended December 31, 1999 from $5.9 million in the same period of the prior year. Gross profits increased by 13% to $7.9 million during the current period from $7 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 25.1% in the current period from 24.6% in the prior fiscal year period. Operating Expenses. Operating expenses totaled $4 million during the current period, an increase of 77.3% from $2.3 million during the same period in the prior fiscal year. The increase in operating expenses during the period was primarily attributable to increased salary and wages and selling expense to support increased business operations and increased depreciation expenses due to increased investment in production facilities. 6 Other Income (Expense), Net. Other expenses, net of other income, increased during the current period to $327,000 from $320,000 in the same period during the prior year. The increase in net other expenses was attributable to an increase in interest expense of $165,000 which was partially offset by an increase in interest income of $94,000 and a favorable variance in other income of $64,000. The increase in interest expense was attributable to increased trust receipt bank loans. The increase in interest income was attributable to increased cash equivalents on hand. The favorable variance in other expense/income was attributable to miscellaneous income incidental to increased business operations. Income Taxes. Income taxes decreased by 17.8% to $577,000 during the current period from $702,000 during the same period in the prior year. The decrease in income taxes during the period was primarily attributable to decreased income. Minority Interest. Minority interest of $1,394,000 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 Group not attributable to the Company. Preferred Stock Dividends. Net income attributable to common stockholders for the quarter ended December 31, 1998 reflects accrued dividends of $493,000 on redeemable preferred stock issued by a subsidiary of the Company at June 30, 1998. The redeemable preferred stock was redeemed in February 1999 and, thus, no preferred stock dividends were reported for the current quarter. Nine Months Ended December 31, 1999 Compared to Nine Months Ended December 31, 1998 Revenues and Gross Profit. Total revenues increased $23.8 million, or 39.1%, to $84.8 million for the nine months ended December 31, 1999 from $61 million for the nine months ended December 31, 1998. Sales of Company products were up 43.9% to $84.8 million during the current period compared to $59 million during the same period in the prior fiscal year. Subcontracting fees decreased from $2 million during the nine months ended December 31, 1998 to $0 during the nine months ended December 31, 1999. 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. 7 Geographically, within Southeast Asia (including Hong Kong and the PRC) the Company's sales increased 40.8% to $39 million during the nine months ended December 31, 1999 from $27.7 million during the same period in the prior year. Sales within Southeast Asia accounted for 46% of total sales during the current period as compared to 47% during the same period in the prior year. Sales within the region increased due to increased production capacity and 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 70% to $8.5 million for the nine months ended December 31, 1999 from $5 million for the same period of the prior year. Sales in the PRC increased approximately 15.8% to $16.1 million for the nine months ended December 31, 1999 from $13.9 million for the same period of the prior year. Sales in Southeast Asia (not including Hong Kong and the PRC) during the nine months ended December 31, 1999 increased 63.6% to $14.4 million from $8.8 million for the same period in the prior year. Outside of Asia (in the United States, Europe and the Middle East), the Company experienced a 47.1% increase in sales with these sales accounting for 54% of total sales in the nine months ended December 31, 1999 as compared to 53% of total sales in the same period of the prior year. The increase in sales outside of Asia was attributable to increased production capacity, increased marketing efforts and strong product demand which accompanied strong economic conditions in those regions. Sales in Europe increased approximately 46.8% to $20.4 million for the nine months ended December 31, 1999 from $13.9 million in the same period of the prior year. Sales in the Middle East were up during the nine months ended December 31, 1999, increasing approximately 32.8% to $8.5 million from $6.4 million in the same period of the prior year. Sales in the United States increased approximately 56% to $17 million during the nine months ended December 31, 1999 from $10.9 million in the same period of the prior year. Gross profits increased by 36.8% to $20.9 million during the current period from $15.3 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 decreased slightly to 24.6% in the current period from 25.0% in the prior fiscal year period. Operating Expenses. Operating expenses totaled $10.8 million during the current period, an increase of 68% from $6.4 million during the same period in the prior fiscal year. The increase in operating expenses during the period was primarily attributable to increased salary and wages, selling expense and depreciation expense to support increased business operations. Other Income (Expense), Net. Other expenses, net of other income, increased during the current period to $1 million from $0.9 million in the same period during the prior year. The increase in net other expenses was attributable to an increase in interest expense of $475,000 which was partially offset by an increase in interest income of $233,000 and a favorable variance in other income of $174,000. The increase in interest expense was attributable to increased trust receipt bank loans. The increase in interest income was attributable to increased cash equivalents on hand. The favorable variance in other expense/income was attributable to miscellaneous income incidental to increased business operations. 8 Income Taxes. Income taxes increased by 14.9% to $1.5 million during the current period from $1.3 million 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 $3.6 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 Group not attributable to the Company. Preferred Stock Dividends. Net income attributable to common stockholders for the nine months ended December 31, 1998 reflects accrued dividends of $1.5 million on redeemable preferred stock issued by a subsidiary of the Company at June 30, 1998. The redeemable preferred stock was redeemed in February 1999 and, thus, no preferred stock dividends were reported for the current period. Financial Condition, Liquidity and Capital Resources The Company had a cash balance of $16.4 million and working capital of $21.5 at December 31, 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 nine months ended December 31, 1999 net cash used in operating activities amounted to $168,000 as compared to net cash provided by operating activities of $1.7 million for the corresponding period of the prior year. This change resulted primarily from a combination of decreased net income and an increase in inventories of $10 million which was partially offset by the non-cash impact of the minority interest charge of $3.6 million, increased depreciation and variances in current assets and liabilities associated with increased sales activities. Net cash used in investing activities totaled $9.1 million during the nine months ended December 31, 1999 compared with $4.3 million during the nine months ended December 31, 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 increased to $8.9 million during the nine months ended December 31, 1999 from $6.4 million during the nine months ended December 31, 1998. The increase was primarily attributable to a decrease in repayments of capital lease obligations and normal variances in short-term and long-term bank borrowings and capital lease obligations. 9 At December 31, 1999, the Company had long term debt totaling $3.3 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 which was partially offset by an increase in capital lease obligations. 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. Year 2000 Issue The Company experienced no material failures and incurred no material costs as a result of the Year 2000. 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 10 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: February 14, 2000 By: /s/ Lam Sai Wing ---------------------------- Lam Sai Wing, President and Chief Executive Officer Dated: February 14, 2000 By: /s/ Chan Yam Fai, Jane ---------------------------- Chan Yam Fai, Jane Chief Financial Officer EX-27.1 2 FINANCIAL DATA SCHEDULE
5 9-mos MAR-31-2000 APR-01-1999 DEC-31-1999 16,358 0 19,594 0 26,936 63,432 27,573 0 91,005 41,968 0 0 0 13 24,145 91,005 84,823 84,823 63,944 63,944 10,818 0 1,593 9,055 1,454 7,601 0 0 0 4,024 0.31 0.31
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