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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November , 1997,
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Zindart Limited
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(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.,
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Hong Kong
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(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 [X] No [ ]
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-________
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ZINDART LIMITED
FORM 6-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
<S> <C>
Press Release Issued November 4, 1997................................... 3
Supplemental Information to Press Release issued November 4, 1997....... 5
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Tuesday November 4 8:05 AM EST
Company Press Release
ZINDART SECOND QUARTER: REVENUES UP 16.8% TO $19.2 MILLION. NET
INCOME UP 55.6% TO $2.2 MILLION
HONG KONG--(BUSINESS WIRE)--Nov. 4, 1997--Zindart Limited (NASDAQ/NMS: ZNDTY)
recorded net income of $2.2 million in the second quarter of fiscal year 1998,
ended September 30, 1997, up 55.6% from $1.4 million of same period in the prior
year.
Net sales increased to $19.2 million from $16.4 million in the second quarter of
fiscal 1997. Earnings per share were $0.33 versus $0.29 in the prior year, up
13.8% despite an increase in outstanding shares. Orders on hand totaled $30.6
million, once again reflecting the strength shown at the end of the first
quarter.
First Half Results
For the six month period ended September 30, 1997, revenues were up 10.3% to
$35.7 million from $32.40 in fiscal 1997. Net income of $4.4 million in 1998
versus $2.8 million for the first half of 1997 was up 57%. Earnings per share of
$0.65 (on 6,714,000 weighted average number of shares outstanding) were up 16%
from $0.56 (on 5,000,000 weighted average number of shares outstanding) in the
prior year.
Growth Initiatives
At the end of the first quarter of fiscal 1998, Chief Operating Officer and
Chief Financial Officer Feather Fok stated that the Company was working on
sustaining and increasing its top-line growth rate on a number of fronts. This
effort progressed during the second quarter. The relocation of production to the
Company's expanded facility at Dongguan continued on schedule. Orders-on-hand
from each of the Company's major customers, as of September 30, 1997 were
strong, as compared to prior year. The Company's stated policy is to continue
building its marketing infrastructure with a view to expanding and to better
serving its global customers. Selling, general and administrative costs,
including marketing costs were up 46.2% from the second quarter of the prior
year, and were up 39.7% for the first six months of fiscal 1998. Selling,
general and administrative costs for the first half of fiscal 1998 amounted to
16.3% of revenues versus 12.9% in the first half of fiscal 1997. Mattel has
become a substantial customer in the current fiscal year, further diversifying
the Company's revenue.
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 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 for
the fiscal 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. William Dunk Partners, Inc.
Feather Fok Deborah Passik
COO & CFO P.O. Box 3687, Chapel Hill, NC
27515
Phone: 011/852-2666-1742 Phone: 919-929-4100
Email: [email protected] Fax: 919-929-1186
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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 SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(UNAUDITED) (UNAUDITED)
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $19,179 $16,420 $35,731 $32,398
Cost of sales 13,537 12,229 25,103 24,419
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Gross profit 5,642 4,191 10,628 7,979
Selling, general and administrative expenses 3,081 2,107 5,815 4,162
------- ------- ------- -------
Operating income 2,561 2,084 4,813 3,817
Other income (expenses), net 124 (209) 248 (338)
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Income before income taxes 2,685 1,875 5,061 3,479
Provision for income taxes 224 143 439 284
------- ------- ------- -------
Net income before minority interest 2,461 1,732 4,622 3,195
Minority interest 213 287 272 425
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Net income $ 2,248 $ 1,445 $ 4,350 $ 2,770
======= ======= ======= =======
Earnings per share $ 0.33 $ 0.29 $ 0.65 $ 0.55
======= ======= ======= =======
Weight average number of shares outstanding 6,916 5,000 6,714 5,000
during the period
Number of shares outstanding as of period 6,725 5,000 6,725 5,000
end
</TABLE>
CONSOLIDATED BALANCE SHEETS
(in thousands of United States dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30
(UNAUDITED)
1997 1996
<S> <C> <C>
ASSETS:
Cash and bank deposits $ 8,613 $ 4,253
Accounts receivable, net 15,951 10,599
Due from related companies -- 3
Deposits and prepayments 2,510 1,376
Inventories, net 8,399 8,144
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Total current assets 35,473 24,375
Property, plant, equipment and capital leases, net 12,371 11,216
Construction-in-progress 6,339 --
Long-term investments 179 179
Deferred stock issuance costs -- 378
Goodwill, net 63 72
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Total assets $54,425 $36,220
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Short-term bank borrowings $ -- 5,555
Long-term bank loans, current portion -- 811
Capital lease obligations, current portion 594 1,164
Accounts payable 2,317 4,194
Receipt in advance 2,907 1,616
Accrued liabilities 9,318 4,579
Due to related companies -- 41
Taxation payable 872 651
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Total current liabilities 16,008 18,611
Long-term debts -- 1,336
Capital lease obligations 1,206 749
Deferred taxation 120 120
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Total liabilities 17,334 20,816
MINORITY INTEREST 1,315 1,026
Paid-in capital 435 323
Additional paid-in capital 14,031 --
Retained earnings 21,310 14,055
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Total Shareholders' Equity 35,776 14,378
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Total Liabilities, Minority Interests and
Shareholders' Equity $54,425 $36,220
======= =======
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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 three major customers -- Hallmark, Ertl and Mattel -- account
for a majority of Zindart's total net 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 and six months ended September 30,
1996 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 29.4% 25.5% 29.7% 24.6%
Selling, general and administrative expenses 16.1% 12.8% 16.3% 12.9%
Operating income 13.4% 12.7% 13.5% 11.8%
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Income before income taxes 14.0% 11.4% 14.2% 10.7%
Provision for income taxes 1.2% 0.9% 1.2% 0.9%
Minority interests 1.1% 1.8% 0.8% 1.3%
Net income 11.7% 8.8% 12.2% 8.6%
</TABLE>
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Three months ended September 30, 1997 and 1996
Net sales. Net sales for the three months ended September 30, 1997 were
$19.2 million, an increase of $2.8 million, or 16.8%, from the same period in
1996. The increase is mainly due to the increase in sales of diecast
collectibles to Mattel.
Gross Profit. Gross profit was $5.6 million for the three months ended
September 30, 1997, an increase of $1.5 million, or 34.6%, from the same period
in 1996. Gross margin was 29.4% in the three months ended September 30, 1997 as
compared to 25.5% in the same period in 1996. This margin growth resulted from a
change in product mix and operating improvement as a result of full utilization
of Phase I of the Dongguan facility. During the three months ended September 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 $3.1 million for the three months ended September
30, 1997, an increase of $1 million, or 46.2%, 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.
Operating and Net Income. As a result of the factors discussed above,
operating income was $2.6 million for the three months ended September 30, 1997,
an increase of $0.5 million, or 22.9%, from the same period in 1996. Net income
was $2.2 million for the three months ended September 30, 1997, an increase of
$0.8 million, or 55.6%, from the same period in 1996.
Six months ended September 30, 1997 and 1996
Net sales. Net sales for the six months ended September 30, 1997 were
$35.7 million, an increase of $3.3 million, or 10.3%, from the same period in
1996. The increase is mainly due to the increase in sales of diecast
collectibles to Mattel in the second quarter, partially offset by constrained
sales growth in the first quarter resulting from labor shortages that abated
early in the second quarter.
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Gross Profit. Gross profit was $10.6 million for the six months ended
September 30, 1997, an increase of $2.6 million, or 33.2%, from the same period
in 1996. Gross margin was 29.7% in the six months ended September 30, 1997 as
compared to 24.6% in the same period in 1996. This margin growth resulted from a
change in product mix and operating improvement as a result of full utilization
of Phase I of the Dongguan facility. During the six months ended September 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 $5.8 million for the six months ended September 30,
1997, an increase of $1.7 million, or 39.7%, 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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Liquidity and Capital Resources
During the six months ended September 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
$14.0 million. Cash and cash equivalents and total indebtedness were $8.6
million and $1.8 million respectively, at September 30, 1997. Cash generated
from operating activities was $1.3 million for the six months ended September
30, 1997. Cash used by investing activities was $6.1 million, primarily as a
result of expenditures for the acquisition of plant and equipment and
construction-in-progress of Phase II of the Dongguan facility.
During the six months ended September 30, 1997, Zindart repaid equipment
lease financings of $0.3 million to two equipment lessors. As of September 30,
1997, the aggregate outstanding amount under all leases was $1.8 million. As of
September 30, 1997, $2.2 million remained available to draw upon under these
leases. These leases require repayment in 48 monthly installments. The first and
second leases carry annual 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 September 30, 1997, these lines of credit allowed for
aggregate borrowings of up to $16.2 million. As of September 30, 1997, Zindart
had no 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 September 30, 1997 was $15.9 million. Zindart has not
experienced any significant problems with collection of accounts receivable from
its customers.
Capital expenditures for the six months ended September 30, 1997 were
$6.1 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.
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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 U.S 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 November 10, 1997 By /s/ Feather S.Y. Fok
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(Signature)
