<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended September 30, 2000
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 000-22161
Zindart Limited
(Exact name of registrant as specified in its charter)
Hong Kong S.A.R., China
(State or other jurisdiction of incorporation or organization)
Not Applicable
(I.R.S. Employer Identification No.)
Flat C&D, 25/F Block 1
Tai Ping Industrial Centre
57 Ting Kok Road, Tai Po
New Territories, Hong Kong S.A.R., China
(Address of principal executive offices)
011-852-2256-6666
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Indicate by checkmark 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
----- -----
The number of ordinary shares outstanding as of September 30, 2000 was
8,834,125 (including the assumed issuance of 666,667 ordinary shares reserved
for future issuance pursuant to the acquisition of Hua Yang Holdings Co., Ltd.).
1.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 11
CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURE PAGE 18
</TABLE>
REPORTS TO SHAREHOLDERS
Zindart Limited (the "Company") is publishing this report on Form 10-Q in order
to provide additional information to the Company's shareholders. However, the
Company, as a foreign private issuer, is not required to publish reports on this
form and may discontinue doing so at any time without prior notice. Moreover, as
a foreign private issuer (i) the Company is and will remain exempt from Section
14(a), 14(b), 14(c), and 14(f) of the Securities Exchange Act of 1934 (the
"Exchange Act") and (ii) the Company's officers, directors and principal
shareholders are and will remain exempt from the reporting and "short-swing"
profit recovery provisions contained in Section 16 of the Exchange Act until
such time as the Company ceases to be a foreign private issuer.
Unless otherwise indicated, amounts denoted by "$" are U.S. dollars and amounts
denoted by "GBP" are pounds sterling of the United Kingdom.
2.
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
As of Sept. As of March 31,
30, 2000 2000
----------- ---------------
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current assets:
Cash and bank deposits $ 5,004 $ 12,488
Accounts receivable, net 29,983 27,015
Bills receivable 139 140
Deposits and prepayments 5,550 4,201
Debt issuance cost 468 642
Inventories, net 16,143 14,824
Loan receivable 2,300 --
--------------- -----------------
Total current assets 59,587 59,310
Property, machinery and equipment, net 33,217 35,804
Loan receivable -- 2,300
Goodwill, net 48,197 49,184
--------------- -----------------
Total assets $ 141,001 $ 146,598
=============== =================
Liabilities, minority interests and shareholders' equity
Current liabilities:
Short-term bank borrowings $ 10,611 $ 5,933
Convertible note, current portion 1,323 1,429
Long-term bank loan, current portion 12,000 12,000
Capital lease obligations, current portion 1,708 1,684
Accounts payable 13,274 14,526
Receipts in advance 1,641 1,358
Accrued liabilities 9,866 10,062
Taxation payable 1,792 2,237
--------------- -----------------
Total current liabilities 52,215 49,229
Long-term bank loan, non-current portion 6,000 12,000
Capital lease obligations, non-current portion 2,307 3,160
Convertible note, non-current portion 1,765 3,332
Deferred taxation 919 967
--------------- -----------------
Total liabilities 63,206 68,688
--------------- -----------------
Minority interests 1,286 1,105
--------------- -----------------
Shareholders' equity:
Common stock 528 528
Common stock reserved and to be issued 43 43
Additional paid-in capital 38,634 38,634
Retained earnings 38,816 37,882
Cumulative translation adjustments (1,512) (282)
--------------- -----------------
Total shareholders' equity 76,509 76,805
--------------- -----------------
Total liabilities, minority interests and shareholders' equity $ 141,001 $ 146,598
=============== =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3.
<PAGE> 4
Consolidated Statements of Operations
Unaudited
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 33,271 $ $ 41,745 $ 68,606 $ 70,318
Cost of sales (22,962) (28,161) (47,455) (48,603)
------------------------ -----------------------
Gross profit 10,309 13,584 21,151 21,715
Selling, general and administrative expenses (8,574) (8,479) (17,557) (13,530)
------------------------ -----------------------
Operating income 1,735 5,105 3,594 8,185
Other expenses, net (812) (321) (1,568) (10)
Amortization of goodwill (494) (384) (987) (554)
------------------------ -----------------------
Income before income taxes 429 4,400 1,039 7,621
Income tax (provision) benefit (102) (689) 76 (976)
------------------------ -----------------------
Income before minority interests 327 3,711 1,115 6,645
Minority interests (2) (71) (181) (219)
------------------------ -----------------------
Net income $ 325 $ 3,640 $ 934 $ 6,426
======================== =======================
Basic earnings per share $ 0.04 $ 0.41 $ 0.11 $ 0.73
Weighted average number of shares outstanding - Basic 8,834 8,814 8,834 8,814
Diluted earnings per share $ 0.04 $ 0.41 $ 0.11 $ 0.72
Weighted average number of shares outstanding - Diluted 8,834 8,936 8,834 8,892
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4.
<PAGE> 5
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------
Sept. 30, Sept. 30,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 934 $ 6,426
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of goodwill 987 554
Amortization of debt issuance cost 174 152
Depreciation of property, machinery and equipment 3,898 2,705
Minority interests 181 219
Deferred taxation (48) (1)
(Increase) decrease in operating assets
Accounts receivable, net (2,968) (18,328)
Bills receivable 1 (10)
Deposits and prepayments (1,349) (1,224)
Inventories, net (1,319) (2,330)
Increase (decrease) in operating liabilities
Accounts payable (1,252) 4,724
Receipts in advance 283 408
Accrued liabilities (196) 7,869
Taxation payable (445) 643
-------------- --------------
Net cash (used in) provided by operating activities (1,119) 1,807
-------------- --------------
Cash flows from investing activities:
Net cash outflow for acquisition of a subsidiary -- (44,236)
Acquisition of property, machinery and equipment (1,311) (1,777)
Additions of deferred expenditures -- (875)
New loan receivables -- (2,200)
-------------- --------------
Net cash used in investing activities (1,311) (49,088)
-------------- --------------
Cash flows from financing activities:
New short-term bank borrowings 22,488 5,933
Repayment of short-term bank borrowings (17,810) (5,315)
New long-term bank loan -- 30,000
Repayment of long-term bank loan (6,000) --
New convertible note issued -- 4,725
Repayment of convertible note (1,673) --
Repayment of capital element of capital lease obligations (829) --
-------------- -------------
Net cash (used in) provided by financing activities (3,824) 35,343
-------------- -------------
Effect of cumulative translation adjustments (1,230) 149
-------------- -------------
Net decrease in cash and bank deposits (7,484) (11,789)
Cash and bank deposits, as of the beginning of the period 12,488 17,061
-------------- -------------
Cash and bank deposits, as of the end of the period $ 5,004 5,272
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5.
<PAGE> 6
6.
<PAGE> 7
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 2000
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Zindart
Limited (the "Company") and its subsidiaries have been prepared in
accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Certain information and footnote disclosures required
by generally accepted accounting principles for complete financial
statements have been condensed or omitted.
In the opinion of management, the accompanying financial statements
include all adjustments considered necessary to present fairly the
financial position, results of operations, and cash flows of the Company.
The results of operations for the three and six months ended September 30,
2000 are not necessarily indicative of the results that may be expected
for fiscal year 2001. These consolidated financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Form 10-K for the fiscal year ended March 31,
2000, which have been previously filed with the Securities and Exchange
Commission.
2. Inventories
Inventories comprised:
<TABLE>
<CAPTION>
September 30, 2000 March 31, 2000
------------------ --------------
<S> <C> <C>
$ '000 $ '000
Raw materials 9,899 6,444
Work-in-process 1,024 3,343
Finished goods 5,970 5,961
---------- ----------
16,893 15,748
Less: Allowance for slow-moving and
obsolete inventories (750) (924)
---------- ----------
16,143 14,824
========== ==========
</TABLE>
3. Comprehensive Income
The Company has adopted SFAS No. 130 "Reporting Comprehensive Income"
which establishes guidance for the reporting and display of comprehensive
income and its components. The purpose of reporting comprehensive income
is to report a measure of all changes in equity that resulted from
recognized transactions and other economic events of the period other than
transactions with stockholders. Adoption of SFAS No. 130 had no economic
impact on the Company's consolidated financial position, net income,
stockholders' equity or cash flows, although the presentation of certain
items has changed. The components of accumulated other comprehensive
income included
7.
<PAGE> 8
in the accompanying consolidated balance sheets consist of cumulative
translation adjustments as of the end of each period.
8.
<PAGE> 9
Comprehensive income and its components, net of tax, comprised:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ -------------------------
2000 1999 2000 1999
------- ------ ------- ------
<S> <C> <C> <C> <C>
$ '000 $ '000 $ '000 $ '000
Net income 325 3,640 934 6,426
Other comprehensive income, net of tax:
Translation adjustments (279) 296 (1,230) 299
------- ------ ------ ------
Comprehensive income (loss) 46 3,936 (296) 6,725
======= ====== ====== ======
</TABLE>
4. Computation of earnings per share
The numerator in calculating both basic and diluted earnings per share for
each period is reported net income. The denominator is based on the
following weighted-average number of common shares:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ -------------------------
2000 1999 2000 1999
------- ------ ------- ------
<S> <C> <C> <C> <C>
(`000) (`000) (`000) (`000)
Basic 8,834 8,814 8,834 8,814
Diluted 8,834 8,936 8,834 8,892
</TABLE>
The difference between basic and diluted weighted average common shares
results from the assumption that dilutive stock options and convertible
securities outstanding were exercised. If there is no difference between
basic and diluted weighted average common shares, it is the result of the
assumption, by the Company, that no dilutive stock options or convertible
securities outstanding will be exercised.
9.
<PAGE> 10
5. Segment Information
The Company organizes its operations into three business segments: (i)
manufacturing of die-cast and injection-molded plastic products under OEM
arrangements, (ii) manufacturing of paper products under OEM arrangements
and (iii) marketing and distribution of die-cast products under the
proprietary brand name owned by its subsidiary, Corgi Classics Limited.
The following table presents certain operating segment information:
<TABLE>
<CAPTION>
Die-Cast Paper Corgi Total
Division Division Classics Segments
-------- --------- -------- --------
<S> <C> <C> <C> <C>
$'000 $'000 $'000 $'000
Three Months Ended
Sept. 30, 2000
Net revenue 11,573 11,418 10,280 33,271
Operating income 555 960 220 1,735
Three Months Ended
Sept. 30, 1999
Net revenue 21,688 14,258 5,799 41,745
Operating income 2,495 1,478 1,132 5,105
Six Months Ended
Sept. 30, 2000
Net revenue 30,039 20,592 17,975 68,606
Operating income (loss) 2,157 1,943 (506) 3,594
Six Months Ended
Sept. 30, 1999
Net revenue 41,240 23,279 5,799 70,318
Operating income 4,887 2,167 1,131 8,185
Total identifiable assets*
Sept. 30, 2000 40,893 25,068 26,843 92,804
Sept. 30, 1999 57,074 32,010 20,497 109,581
</TABLE>
*Identifiable assets represent total assets less goodwill.
10.
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934 regarding events and trends which may affect the Company's future operating
results and financial position. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
anticipated. These risks and uncertainties include, but are not limited to,
changes in market demand for our products, changes in general economic
conditions, dependence on certain customers, the results of our planned growth
initiatives, competition, changes in governmental regulations, a decline in
capital markets, changes in the political, social and economic situations of
Hong Kong and the People's Republic of China, and other risks described in the
Company's Form 10-K for the fiscal year ended March 31, 2000. In some cases,
forward looking statements can be identified by terminology such as "may,"
"will," "should," "could," "predicts," "potential," "continue," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates," and
similar expressions. The forward-looking statements are based on information
available to the Company on the date of this report, and the Company undertakes
no obligation to revise these forward-looking statements to reflect subsequent
events or circumstances.
OVERVIEW
The Company is a turnkey manufacturer of high-quality die-cast, injection-molded
and paper products, including replica scale model collectibles, quality
hand-made books and specialty packaging products. The Company is a Hong Kong
corporation headquartered in Hong Kong, and its manufacturing operations are
located in the neighboring Guangdong province of mainland China. The Company
serves a growing number of customers that are brand-name marketers of die-cast
and injection-molded giftware and collectibles, as well as packagers and
publishers of books in the United States and Europe.
On July 28, 1999, the Company acquired all of the outstanding shares of Corgi
Classics Limited ("Corgi"), a corporation registered in England and Wales. Corgi
is a producer of collectible items and figurines. In consideration for shares of
Corgi, the Company paid GBP29.0 million to the stockholders, including the
repayment of Corgi's existing debt, the redemption of GBP6.6 million of
preferred stock from certain former stockholders of Corgi and the issuance of
GBP3.0 million in the form of a convertible note (the "Convertible Note") to
certain stockholders of Corgi. The Convertible Note carries with it a right
exercisable by the Noteholders (as defined in the Convertible Note) to require
the Company to purchase the outstanding amount of the Convertible Note in
exchange for the issuance to the Noteholders of common stock of the Company on
terms set forth in the Convertible Note. This right is exercisable over a
three-year period commencing on July 28, 1999, subject to certain conditions.
The acquisition was financed by a thirty-month installment bank loan of $30.0
million and convertible note of approximately $4.8 million (equivalent of GBP3.0
million).
On November 16, 1999, Corgi purchased certain assets from Lledo PLC ("Lledo"), a
leading brand in the United Kingdom collectibles industry, including the right
to the brand name of Lledo and certain tooling, for GBP1.95 million in cash.
11.
<PAGE> 12
RESULTS OF OPERATIONS
The table below sets forth certain statement of operations data as a percentage
of net sales for the three and six months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 31.0% 32.5% 30.8% 30.9%
Selling, general and administrative 25.8% 20.3% 25.6% 19.2%
expenses
Operating income 5.2% 12.2% 5.2% 11.6%
Other expenses, net 2.4% 0.8% 2.3% 0.0%
Amortization of goodwill 1.5% 0.9% 1.4% 0.8%
Income before income taxes 1.3% 10.5% 1.5% 10.8%
Income tax (provision) benefit (0.3%) (1.7%) 0.1% (1.4%)
Minority interests 0.0% 0.2% 0.3% 0.3%
Net income 1.0% 8.7% 1.4% 9.1%
</TABLE>
Net sales. Net sales for the three months ended September 30, 2000 were
$33.3 million, a decrease of $8.5 million, or 20.3%, from the same period in
1999. The Company was affected by the die-cast industry downturn and
accordingly, total revenue reflected a decrease due to lower die-cast sales. The
reduction was partially offset by Corgi's revenue, which grew 35% from the
quarter a year ago and represented 31% of net sales in the three months ended
September 30, 2000, up from 14% of net sales in the same period in 1999. Net
sales included three months of net sales for Corgi in 2000, as compared to only
two month of net sales in 1999 due to the purchase accounting associated with
the timing of the acquisition.
Net sales for the six months ended September 30, 2000 were $68.6 million, a
decrease of $1.7 million, or 2.4%, from the same period in 1999. The Company was
affected by the die-cast industry downturn. Total revenue reflected a decrease
due to lower die-cast sales, but the reduction was partially offset by Corgi's
revenue. Net sales included six months of net sales for Corgi in 2000, as
compared to only two month of net sales in 1999 due to the purchase accounting
associated with the timing of the acquisition.
Gross profit. Gross profit was $10.3 million for the three months ended
September 30, 2000, a decrease of $3.3 million, or 24.1%, from the same period
in 1999. The gross margin was 31% for the three months ended September 30, 2000,
as compared to 32.5% for the same period in 1999. The decrease in gross profit
and gross margin was due to lower sales, lower margins in the die cast division
as a result of a change in product mix, competitive price points for the paper
division, as well as higher depreciation costs relating to the Lledo asset
purchase by Corgi.
12.
<PAGE> 13
Gross profit was $21.2 million for the six months ended September 30, 2000,
which was approximately the same as gross profit during the same period in 1999.
The gross margin was 30.8% for the six months ended September 30, 2000, which
was approximately the same as gross margin during the same period in 1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $8.6 million for the three months ended September
30, 2000, which was approximately the same as such expenses during the same
period in 1999. A saving in the die-cast and paper divisions was offset by an
increase in Corgi expenses for expansion of the U.S. market. Selling, general
and administrative expenses included three months of expenses for Corgi in 2000,
as compared to two months for the same period in 1999 due to the purchase
accounting associated with the timing of the acquisition.
Selling, general and administrative expenses were $17.6 million for the six
months ended September 30, 2000, an increase of $4.0 million or 29.8% from the
same period in 1999. The increase was primarily due to the addition of the
selling, general and administrative expenses of Corgi for six months in 2000, as
compared to two months for the same period in 1999 due to the purchase
accounting associated with the timing of the acquisition.
Other (expenses) income, net. Other expenses were $812,000 for the three
months ended September 30, 2000, an increase of $491,000 from the same period in
1999. The increase in other expenses was primarily due to full quarter interest
expenses and amortization of goodwill associated with the Corgi acquisition.
Other expenses were $1.6 million for the six months ended September 30,
2000, an increase of $1.6 million from the same period in 1999. The increase in
other expenses was primarily due to six month interest expenses and amortization
of goodwill associated with the Corgi acquisition.
Net income. Net income was $325,000 for the three months ended September
30, 2000, a decrease of $3.3 million from the same period in 1999. The decrease
in net income was primarily due to lower margins in the die cast division as a
result of a change in product mix, increased price competition for the paper
division, and full quarter interest and goodwill amortization expenses
associated with the Corgi acquisition.
Net income was $934,000 for the six months ended September 30, 2000, a
decrease of $5.5 million from the same period in 1999. The decrease in net
income was primarily due to lower margins in the die cast division as a result
of a change in product mix, increased price competition for the paper division,
and six month interest and goodwill amortization expenses associated with the
Corgi acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Cash and bank deposits were $5.0 million at September 30, 2000. Cash used
in operating activities was $1.1 million for the six months ended September 30,
2000. Cash used in investing activities was $1.3 million for the first six
months ended September 30, 2000. Such cash was used primarily in connection with
the acquisition of property, machinery and equipment.
13.
<PAGE> 14
The Company has lines of credit with certain banks including ABN AMRO Bank,
Standard Chartered Bank, KBC Bank NV and The Hongkong and Shanghai Banking
Corporation Limited. As of September 30, 2000, the Company had banking
facilities with these banks of up to $54.7 million. On July 28, 1999, the
Company drew down a $30.0 million term loan from ABN AMRO Bank in connection
with the Corgi acquisition. The loan bears interest at 3-month LIBOR plus a
margin. The term loan has a tenure of 30 months. The Company expects to repay
the term loan and related interest from internally generated funds. As of
September 30, 2000, $12.0 million of such loan was repaid.
In May 1999, the Company entered into a credit agreement (the "IBI
Agreement") with one of its customers, Intervisual Books Inc. ("IBI"), to
facilitate IBI's acquisition of a distribution company. The Company believes
this acquisition will be beneficial to both IBI and the Company. Under the terms
of this credit agreement, the Company agreed to provide a $2.3 million revolving
credit facility to IBI, which bears interest at a rate of 5% above LIBOR per
annum and is secured by certain assets of IBI. The facility matured in May 2000.
Pursuant to the IBI Agreement, IBI extended the facility for an additional year
and issued the Company warrants to purchase 150,000 shares of common stock of
IBI.
Consistent with industry practice, the Company offers accounts receivable
terms to its customers. This practice has created working capital requirements
that the Company generally has financed with net cash balances, internally
generated cash flow and short-term bank borrowings. On September 30, 2000, the
Company's accounts receivable balance was $30.0 million.
EXCHANGE RATE RISK
The Company's sales are denominated in either U.S. dollars, GBP or Hong
Kong dollars. The majority of the Company's expenses are denominated in Hong
Kong dollars, followed by renminbi (the currency of Mainland China), GBP and
U.S. dollars. The Company is subject to a variety of risks associated with
changes among the relative values of the U.S. dollar, GBP, Hong Kong dollar and
the renminbi. The Company does not currently hedge its foreign exchange
positions. Any material increase in the value of the Hong Kong dollar, renminbi
or GBP relative to the U.S. dollar would increase the Company's expenses and
therefore would have a material adverse effect on the Company's business,
financial condition and results of operations.
SEASONALITY
In the past, the Company's operating results have fluctuated and those
results may fluctuate in the future. The Company ceases production for a
two-week period during January or February of each year due to the observance of
the lunar New Year holiday in Hong Kong and Mainland China, which has caused
revenues during the fourth fiscal quarter of each year to be lower than revenues
during the other three quarters. The Company may also experience fluctuations in
quarterly sales and related net income compared with other quarters due to the
timing of receipt of orders from customers and the shipment of products. Sales
of books are weighted toward the Christmas season; consequently, book sales in
the first half of our fiscal year are generally higher than in the second half.
14.
<PAGE> 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary risk exposures arise from changes in interest rates
and foreign currency exchanges rates. The Company had $32.6 million in variable
rate debt outstanding at September 30, 2000. The Company does not currently
hedge its interest rate exposure. Based on its current level of variable rate
debt, the Company believes that its results from operations and cash flows would
not be adversely affected if the applicable interest rate were increased by one
percent.
The Company is exposed to risk from changing foreign currency exchange
rates. The Company's sales are denominated either in U.S. dollars, GBP or Hong
Kong dollars. The majority of the Company's expenses are denominated in Hong
Kong dollars, followed by renminbi (the currency of Mainland China), GBP and
U.S. dollars. The Company is subject to a variety of risks associated with
changes among the relative values of the U.S. dollar, GBP, Hong Kong dollar and
the renminbi. The Company does not currently hedge its foreign exchange
positions. Any material increase in the value of the GBP, Hong Kong dollar or
renminbi relative to the U.S. dollar would increase the Company's expenses and
therefore would have a material adverse effect on the Company's business,
financial condition and results of operations. If exchange rates on such
currencies were to fluctuate 10%, the Company believes that its results from
operations and cash flows would not be adversely affected.
15.
<PAGE> 16
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual general meeting of the Company's stockholders was held on September
6, 2000, to consider and vote upon the following matters, each of which were
approved by the indicated vote:
1. Proposal to adopt the audited financial statements and the reports of the
directors and auditors of the Company for the fiscal year ended March 31, 2000.
<TABLE>
<CAPTION>
Votes for Votes against Abstentions
------------ ---------------- --------------
<S> <C> <C>
4,765,317 30,890 32,090
</TABLE>
2. Proposal to re-elect the following nominees for director until the next
Annual General Meeting of Shareholders and until their successors are elected.
<TABLE>
<CAPTION>
Votes cast for each director
----------------------------------------------------------------------------------
Votes for Votes against Abstentions
----------- ---------------- ---------------
<S> <C> <C> <C>
Robert A. Theleen 3,105,924 1,716,773 5,600
Alexander M.K. Ngan 3,094,825 1,728,113 5,359
Feather S.Y. Fok 3,095,297 1,700,573 32,427
George Chen 3,088,884 1,707,073 32,340
Peter A.J. Gardiner 3,104,874 1,690,783 32,640
James E. Gilleran 3,111,774 1,683,883 32,640
Christopher Guest 3,104,174 1,691,483 32,640
Leo Paul Koulos 3,105,474 1,690,483 32,340
Gordon L. M. Seow 3,096,384 1,699,573 32,340
Victor Yang 3,096,984 1,697,973 33,340
</TABLE>
3. Proposal to authorize the Board of Directors of the Company to issue all or
part of the authorized but unissued shares of the Company, in such manner and to
such persons as the Board of Directors of the Company shall deem fit in its
absolute discretion, such authorization to lapse at the Company's next annual
general meeting.
<TABLE>
<CAPTION>
Votes for Votes against Abstentions
----------- ---------------- --------------
<S> <C> <C>
3,033,435 1,778,193 16,669
</TABLE>
4. Proposal to re-appoint Arthur Andersen & Co. as independent auditors of the
Company for the fiscal year ending March 31, 2001.
<TABLE>
<CAPTION>
Votes for Votes against Abstentions
----------- ---------------- ---------------
<S> <C> <C>
4,782,730 18,950 26,617
</TABLE>
16.
<PAGE> 17
ITEM 5. OTHER INFORMATION
On September 6, 2000, Peter Gardiner, a director of the Company, was appointed
Chairman of the Board of Directors of the Company. Mr. Gardiner works on a full
time basis and leads the strategic, tactical and operational development of the
Company, as well as directly handles investor relations. Robert Theleen, the
former Chairman, remains on the Board of Directors of the Company as
Vice-Chairman.
Items 1, 2, and 3 of Part II are not applicable and have been omitted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed with this report:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ------------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On October 13, 2000, the Company filed with the Securities and Exchange
Commission (the "SEC") a Current Report on Form 8-K supplementing
certain information set forth in the Company's Proxy Statement for
Annual General Meeting of Shareholders on September 6, 2000 (as filed
with the SEC on Schedule 14A on July 31, 2000).
17.
<PAGE> 18
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
/s/ Feather Fok
----------------------------------------------
Dated: November 14, 2000 By: Feather Fok
Chief Financial Officer
(Principal Financial Officer)
18.
<PAGE> 19
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
------- ------------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
19.
