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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 1997
ZINDART LIMITED
(Translation of registrant's name into English)
Flat C & D, 25/F., Block 1, Tai Ping Industrial Centre, 57, Ting Kok Road,
Tai Po, N.T., Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A
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ZINDART LIMITED
FORM 6-K
TABLE OF CONTENTS
Page
Press Release issued August 5, 1997....................................... 3
Supplemental Information to Press Release issued August 5, 1997........... 6
2.
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ZINDART LIMITED
FOR IMMEDIATE RELEASE
ZINDART LIMITED (ZNDTY) First Quarter: Net Income up 58.6% to $2.1 million on
revenues of $16.6 million: Orders strong at $29.4 million.
HONG KONG August 5, 1997. Zindart Limited (NASDAQ/NM:ZNDTY) recorded net income
of $2.10 million in its first quarter of fiscal year 1998, ended June 30, 1997,
up 58.6% from $1.33 million in the prior year. Net sales increased to $16.55
million from $15.98 million in the first quarter of fiscal year 1997. Earnings
per share moved up to $0.31, from $0.27, despite an increase in the number of
shares outstanding from 5,000,000 to 6,725,000.
GROSS MARGINS AT 30%
Gross margins for the quarter, approximately 30.1%, were well above the 23.7%
achieved in the same period for the prior year. This margin growth resulted from
operating improvement as a result of full utilization of Phase I of the Dongguan
facility. Gross margins improved sequentially in each of the prior four
quarters.
Improved margins were also accompanied by a healthy expansion of orders. As of
June 30, 1997, the Company's orders on-hand totaled $29.4 million as compared to
$18.4 million as of June 30, 1996.
INVESTMENTS IN GROWTH
Marketing and administrative costs, which were 12.9% of revenues in the prior
year, rose to just over 16% in the first quarter. This increase resulted from
additional personnel costs associated with supporting growth of the Company's
business and additional legal and professional expenses associated with the
Company's new status as a public company.
Growth initiatives progress in several areas of the Company. In August,
operations are scheduled to start up at the Company's U.S. marketing office
based on the West Coast. The expansion of the Company's production facility at
Dongguan, which will allow more than double the staff and size of that
installation, is scheduled to be completed during fiscal 1998. The construction
has been completed and production is scheduled to be relocated to Dongguan
during the second and third quarters.
Commenting on this growth, Chief Operating Officer Feather Fok stated, "We are
working to sustain our top line growth by adding major customers globally,
augmenting our product line and building a marketing infrastructure that can
provide additional services to existing customers.
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Due to one-time factors, growth was moderate in the first quarter. Temporary
labor shortages, which gradually improved in July, and the late receipt of some
large orders constrained progress on the sales front.
SHIFT IN INTEREST EXPENSE
The Company enjoyed major shifts in interest expense and income, arising from
the IPO in March 1997. Interest expense fell from $281,000 in the first quarter
of fiscal year 1997 to $56,000 in the first quarter of fiscal year 1998, while
interest income moved up sharply from $28,000 to $126,000. Cash and cash
equivalents were $13.2 million as of June 30, 1997.
Zindart, which was founded in 1978, is a Hong Kong based manufacturer of
high-quality detailed metal die-cast and plastic molded collectibles, ornaments,
and toys. Its major customers are in the United States.
Certain statements in this release, including without limitation statements
regarding the timing of completion of Phase II construction at the Dongguan
Facility and the expected benefits of relocating its production lines to the
Dongguan Facility, are forward-looking statements. These statements are subject
to risks and uncertainties that could cause actual results to materially differ
from those anticipated in the forward-looking statements. Risks and
uncertainties that might cause such a difference include, without limitation,
changes in market demand for the Company's products, changes in economic
conditions, construction delays, logistical problems in consolidating production
at a single facility and other risks detailed in the Company's Securities and
Exchange Commission filings, including those risk factors set forth in the
Company's Form 20-F for the year ended March 31, 1997. The Company undertakes no
obligation to revise these forward-looking statements to reflect subsequent
events or circumstances.
Zindart prepares its financial results in U.S. dollars in accordance with
U.S GAAP.
CONTACT: Zindart Ltd., Hong Kong
Feather Fok, COO & CFO
011/852-2666-1742, [email protected]
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ZINDART LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of United States dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30
(Unaudited)
1997 1996
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<S> <C> <C>
Net sales $16,552 $15,978
Cost of sales 11,566 12,190
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Gross Profit 4,986 3,788
Selling, general and administrative expenses 2,734 2,055
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Operating income 2,252 1,733
Other income (expenses), net 124 (129)
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Income before income taxes 2,376 1,604
Provision for income taxes 215 141
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Net income before minority interest 2,161 1,463
Minority interest 59 138
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Net income $ 2,102 $ 1,325
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Earning per share $ 0.31 $ 0.27
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Weight average number of shares outstanding during the period 6,720 5,000
Number of shares outstanding as of June 30 6,725 5,000
</TABLE>
CONSOLIDATED BALANCE SHEETS
(in thousands of United States dollars)
<TABLE>
<CAPTION>
June 30
(Unaudited)
1997 1996
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<S> <C> <C>
ASSETS:
Cash and bank deposits $13,191 $ 893
Accounts receivable, net 9,307 10,772
Deposits and prepayments 2,413 164
Inventories, net 9,138 7,559
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Total current assets 34,049 19,388
Property, plant, equipment and capital leases, let 11,825 11,029
Construction-in-progress 4,589 --
Long-term investments 179 179
Goodwill, net 65 72
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Total assets $50,707 $30,668
Short-term bank borrowings $ 279 $ 4,439
Capital lease obligations, current portion 713 1,120
Accounts payable 2,392 3,279
Receipt in advance 2,179 1,029
Accrued liabilities 8,495 4,482
Taxation payable 648 543
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Total current liabilities 14,706 14,892
Long-term debts -- 1,517
Capital lease obligations 1,250 467
Deferred taxation 120 120
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Total liabilities 16,076 16,996
Minority Interest 1,103 739
Paid-in capital 435 323
Additional paid-in capital 14,031 --
Retained earnings 19,062 12,610
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Total Shareholders' Equity 33,528 12,933
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Total Liabilities, Minority Interests and Shareholders' Equity $50,707 $30,668
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5.
</TABLE>
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Supplemental Information
Zindart Limited ("Zindart" or the "Company") is a leading manufacturer of
high-quality die-cast and injection-molded products for the premier U.S.
designers and marketers of die-cast collectibles, holiday ornaments and toys.
Sales to two major customers -- Hallmark and Ertl -- account for a majority of
Zindart's total net sales, and the Company anticipates that sales to Mattel will
comprise a significant portion of future sales. Zindart's dependence on these
customers is expected to continue in the foreseeable future. Although management
believes that any one of its customers could be replaced eventually, the loss of
any one of its major customers or a material reduction in received or
anticipated orders from such customer would have a material adverse effect on
Zindart's business, financial condition and results of operations. Zindart may
also experience fluctuations in quarterly sales and related net income compared
with the prior year's comparable quarter due to the timing of receipt of orders
from its customers for die-cast collectibles, toys and molds, the shipment of
such products and the timing of Company expenses. As a result, Zindart may
experience quarterly or annual variations in operating results or, in any event,
Zindart's results may not meet analyst's expectations from time to time, either
of which could adversely affect the trading price of Zindart's American
Depositary Shares. Zindart is also subject to certain risks relating to the
conduct of business in Hong Kong and the People's Republic of China (the "PRC").
For more discussion of these and other risks relating to Zindart, see Zindart's
Annual Report on Form 20-F for the year ended March 31, 1997 (the "Form 20-F").
Certain statements in this release are forward-looking. These statements are
subject to risks and uncertainties that could cause actual results to materially
differ from those anticipated. Risks and uncertainties include, in addition to
those discussed above and without limitation, changes in market demand for the
Company's products, changes in economic conditions, construction delays with
respect to the Company's new facilities, logistical problems in consolidation
production at a single facility and other risks described in the Form 20-F. The
Company undertakes no obligation to revise these forward-looking statements to
reflect subsequent events or circumstances.
Results of Operations
The table below sets forth certain statement of operations data as a percentage
of net sales for the three months ended June 30, 1996 and 1997.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1996 1997
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<S> <C> <C>
Net sales 100.0% 100.0%
Gross profit 23.7% 30.1%
Selling, general and administrative expenses 12.9% 16.5%
Operating income 10.9% 13.6%
Income before income taxes 10.0% 14.4%
Provision for income taxes 0.9% 1.3%
Minority interests 0.9% 0.4%
Net income 8.3% 12.7%
</TABLE>
Three months ended June 30, 1997 and 1996
Net sales. Net sales for the three months ended June 30, 1997 were $16.6
million, an increase of $0.6 million, or 3.6%, from the same period in 1996.
Labor shortages, which gradually improved in July 1997, and late receipt of some
large orders in the three months ended June 30, 1997, temporarily limited net
sales growth.
Gross Profit. Gross profit was $5.0 million for the three months ended June 30,
1997, an increase of $1.2 million, or 31.6%, from the same period in 1996. Gross
margin was 30.1% in the three months ended June 30, 1997 as compared to 23.7% in
the same period in 1996. This margin growth resulted from operating improvement
as a result of full utilization of Phase I of Dongguan facility. During the
three months ended June 30, 1996, the Company incurred costs associated with
operating the new facility in Dongguan at less than full capacity and training
new employees.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $2.7 million for the three months ended June 30,
1997, an increase of $0.7 million, or 33.0%, from the same period in 1996. This
increase resulted from additional personnel costs associated with supporting
growth of the Company's business and additional legal and professional expenses
associated with the Company's new status as a public company. The Company
anticipates that its selling, general and administrative expenses may increase
at a moderate rate in subsequent periods.
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Operating and Net Income. As a result of the factors discussed above, operating
income was $2.3 million for the three months ended June 30, 1997, an increase of
$0.5 million, or 29.9%, from the same period in 1996. Net income was $2.1
million for the three months ended June 30, 1997, an increase of $0.8 million,
or 58.6%, from the same period in 1996.
Liquidity and Capital Resources
During the three months ended June 30, 1997, Zindart financed its
operations through cash from operations and sales of equity securities. Zindart
increased its working capital in March and April 1997 in connection with the
Company's initial public offering, with net proceeds to Zindart of approximately
$14.1 million. Cash and cash equivalents and total indebtedness were $13.2
million and $2.2 million respectively, at June 30, 1997. Cash generated from
operating activities was $3.5 million for the three months ended June 30, 1997.
Cash used by investing activities was $3.3 million, primarily as a result of
expenditures for the acquisition of plan and equipment and
construction-in-progress of Phase II of the Dongguan facility.
During the three months ended June 30, 1997, Zindart repaid equipment
lease financings of $0.2 million to two equipment lessors. As of June 30, 1997,
the aggregate outstanding amount under all leases was $2.0 million. As of June
30, 1997, $1.84 million remained available to draw upon under these leases.
These leases require repayment in 48 monthly installments. The first and second
leases carry interest rates of 9.3% and 7.2%, respectively.
Zindart has revolving lines of credit with three banks: Standard
Chartered Bank, The Hong Kong and Shanghai Banking Corporation Limited and
Citibank, N.A. As of June 30, 1997, these lines of credit allowed for aggregate
borrowings of up to $16.2 million. As of June 30, 1997, Zindart had $0.3 million
of short-term borrowing outstanding under these revolving lines of credit. In
May 1997, Zindart renegotiated its banking facilities. As a result,the banks
have released all loan covenants, mortgages over properties and pledges of bank
deposits previously made by Zindart.
Consistent with practice in the giftware, collectibles and toy
industry, Zindart offers accounts receivable terms to its customers, This
practice has created working capital requirements that Zindart generally has
financed with net cash balances, internally generated cash flow and loans.
Zindart's accounts receivable balance at June 30, 1997 was $9.3 million. Zindart
has not experienced any significant problems with collection of accounts
receivable from its customers.
Capital expenditures for the three months ended June 30, 1997 were $3.3
million. Zindart believes that the proceeds from its initial public offering,
cash generated from operations and its existing credit facilities will be
sufficient to satisfy its working capital and capital expenditure requirements
for at least the next 18 months. However, this forward-looking statement
involves certain risks. See "Risk Factors" in the Form 20-F.
All of Zindart's sales are denominated either in U.S Dollars or Hong
Kong Dollars. The largest portion of Zindart's expenses are denominated in Hong
Kong Dollars, followed by Renminbi (the PRC's currency) and US Dollars. The
exchange rate of the Hong Kong Dollar is currently pegged to the U.S. Dollar,
but during the past several years the market exchange rate has fluctuated within
a narrow range. The PRC government sets the exchange rate between the Renminbi
and all other currencies. As a result, the exchange rate between the Renminbi
and the U.S. Dollar and the Hong Kong Dollar has fluctuated in the past and may
fluctuate in the future. If the value of the Renminbi or the Hong Kong Dollar
decreases relative to the U.S. Dollar, such fluctuation may have a positive
effect on Zindart's results of operations. If the value of the Renminbi or the
Hong Kong Dollar increases relative to the U.S. Dollar, such fluctuation may
have a negative effect on Zindart's results of operations.
Zindart does not currently hedge its foreign exchange positions.
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SIGNATURES
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.
Zindart Limited
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(Registrant)
Date August 12, 1997 By /s/ Feather S.Y. Fok
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(Signature)
8.
