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FIRST QUARTER REPORT
FOR THE THREE MONTHS
ENDED JUNE 30, 1998
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TO OUR STOCKHOLDERS:
For the first fiscal quarter of 1999, the Company reported that net sales fell
2% to $15.8 million from $16.1 million reported for the corresponding quarter in
the previous fiscal year. Net income decreased to $3.1 million from $4.1
million reported for the first quarter of fiscal 1998. Fully diluted earnings
per share decreased to $0.23 from $0.38 a year ago. It should be noted that the
weighted average number of shares outstanding increased 26% as a result of the
Company's initial public offering in June 1997.
Management is quite disappointed with the results driven by weak semiconductor
unit volumes. After more than 2 years of solid growth in the semiconductor
industry, the first quarter of 1999 saw a reversal in this trend. The
semiconductor industry's performance during the quarter was characterized by a
slackening in demand for PC's that exceeded the usual seasonal slowing, ongoing
adjustments in personal computer inventory levels as producers work towards
Just-In-Time (JIT) manufacturing, and the continuing effects of the economic
crisis in Asia.
In this period of slackening demand, we have maintained our net income at
nearly 20% of sales. We hope to improve on this going forward as additional
operational adjustments take affect. With the most dramatic sales drop
occurring in the later part of the quarter, there was little opportunity to
realign overhead to the current business climate. The operational adjustments
will occur in this and the coming quarters. We expect to bring the overhead
structure into alignment with current demand while maintaining our ability to
respond quickly to changing business opportunities. Senior management has taken
salary cuts ranging from 10% to 25% offering Peak the flexibility to capitalize
on market opportunities while retaining the team that has propelled our growth.
Additionally, discretionary spending is being tightly controlled and reduced
wherever possible to economize during this slow period.
While the first quarter's economic climate offered some disappointment, Peak's
leadership position is being maintained. We are convinced that our market share
has been maintained or increased in various market segments during the past
quarter and that the slowdown is not the result of a loss in customers to
competitors. The key to one of the most significant portions of our future
growth is that sales of our carrier tape and related products have set an
historical record.
In June, we sold carrier tape to more than 50 customers worldwide with 12
customers exceeding $10,000 for the month and 3 exceeding $50,000. A year ago,
the customer base for tape was less than half this level. In June alone, despite
being weak for semiconductor unit volumes, total sales of taping products
exceeded $750,000. As the industry recovers from this current period of slack
demand we have positioned Peak to benefit from market share gains, increased
sales, and higher levels of profitability.
We remain confident that Peak's unique position in the market will continue to
benefit from the strength of our business model.
/s/ RICHARD BROOK
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RICHARD BROOK
PRESIDENT AND
CHIEF OPERATING OFFICER
JULY 29, 1998
RESULTS AT A GLANCE...
FIRST QUARTER ENDED JUNE 30,
1998 1997
- --------------------------------------------------------------
Net sales $15,769,000 $16,070,000
Net income 3,080,000 4,107,000
Per share - Diluted $0.23 $0.38
# Shares - Diluted 13,672,000 10,824,000
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CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30,
(Unaudited)
1998 1997
- --------------------------------------------------------------
(in thousands, except per share data)
Net Sales $ 15,769 $ 16,070
Cost of Goods Sold 9,446 9,325
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Gross Profit 6,323 6,745
General & Administrative, and
Research & Development 1,755 1,176
Selling & Marketing 1,527 1,291
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Operating Income 3,041 4,278
Other Income net 94 387
Interest Income/(expense)- net 249 (225)
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Profit Before Tax 3,384 4,440
Taxation 304 333
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NET INCOME $ 3,080 $ 4,107
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EARNINGS PER SHARE
- - Basic $ 0.23 $ 0.38
- - Diluted $ 0.23 $ 0.38
Weighted Avg #Shares-Diluted 13,672 10,824
CONSOLIDATED BALANCE SHEETS
June 30, March 31,
1998 1998
(unaudited)
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(in thousands)
ASSETS
Current assets:
Cash & cash equivalents $ 19,623 $ 19,214
Investment in CD - 100
Accounts receivable-net 10,021 10,141
Inventory-net 31,098 27,941
Other current assets 2,614 5,796
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Total Current Assets 63,356 63,192
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Property, plant and
equipment-net 30,995 26,348
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TOTALS $ 94,351 $ 89,540
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LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Bank borrowings 890 89
Accounts payable 7,532 7,251
Taxation 4,051 3,800
Total Current Liabilities 12,473 11,140
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Deferred income taxes 827 818
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Total Liabilities 13,300 11,958
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Stockholders' Equity:
Share capital 135 135
Additional paid-in capital 34,620 34,034
Retained earnings 47,197 44,117
Cumulative translation
adjustment (901) (704)
Total stockholders' equity 81,051 77,582
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TOTALS $ 94,351 $ 89,540
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