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1. Overview
KR Precision
(KR) was incorporated in 1988 to manufacture suspension
assemblies for the hard disk drive industry.
Suspensions are
the metal springs that hold
the magnetic recording head over the surface of
the disk. KR subsequently listed on the Stock
Exchange of Thailand in 1995. Today, KR Precision
is one of the four major independent suppliers of
suspension assemblies and precision metal components.
KR does
all engineering, manufacturing and development on
one site in Ayutthaya, Thailand.
Suspensions are shrinking in size while performance
requirements are becoming ever more demanding as
areal density increases. KR has developed several
proprietary advanced manufacturing technologies
capable of accurately characterizing the key performance
variables of these highly demanding products. KR
believes that its success depends on its ability
to be early on customer programs and obtaining qualification
as the primary supplier of
suspensions for new programs. In order
to keep abreast with the rapid technological changes
of the disk drive industry, KR must constantly invest
in research and development coupled with a
substantial investment in manufacturing technologies
and equipment.
2.
Products and Customer Mix
There are five major suspension product types designed
into disk drives today:
Conventional,
FSA, CIS, TSA and Unimount.
KR enjoys a unique position in the
suspension industry by being able to manufacture all types. During the year 2001
KR signed license agreements with Hutchinson Technology
and Innovex. Together with the license agreement
signed in 2000 with Nihon Hatsujo Kabusikigaisha
(NHK), these agreements broaden KR's product offering to
include TSA, FSA and FgSA suspensions. KR is
now emphasizing new product efforts for the 3½
“ drives and 2½“ drive programs.
The Company supplies a variety of suspension assemblies
based on several standard designs
to original equipment
manufacturers (OEMs) for use in their products and
to third parties who sub-assemble products on behalf
of these OEMs. In fiscal 2001,
99% of the Company's sales were suspension
assemblies. Other products include floppy gimbals
for use in floppy disk drives and tooling services
in connection with suspension assemblies.
KR shipped a total of 72.6 million suspensions
in fiscal 2001, an increase of 15% compared to 63
million units in the previous year. Wireless suspension
assemblies accounted for 66% of revenue in 2001
compared to 19% during 2000 as KR's product mix
shifted to higher volumes of wireless suspensions. KR
expects long-tail wireless suspensions to account
for over 80% of its total units shipment during
2002.
3. Competition
KR
Precision’s main competitors include Hutchinson
Technology (HTI) , Magnecomp Corporation and NHK.
HTI, the biggest producer of suspensions, is based
in Minnesota. HTI holds the intellectual properties
(IP) for TSA suspension and has cross-licensed this
to each of the other suspension manufacturers: KR,
NHK and Magnecomp. NHK with operations in Japan
is the second largest producer of suspension and
holds the IP for Fuma suspension. KR has a license agreement with NHK on Fuma suspensions.
Magnecomp is based in Singapore and has operations
in the US, China and Thailand.
Data storage alternatives
such as semiconductor (flash) memory have regularly
threatened to replace the hard disk drive and thereby
affecting the demand of our products. Product designers today have principally focused
on three competing storage solutions, flash memory,
optical drives and hard disk drives.
Each product category offers advantages in
terms of storage capacity, price, power consumption
and storage characteristics. There is a high rate
of technological advancement in the data storage
industry.
4. Result of Operations for the fourth quarter ended December
31, 2001
The
following table set forth the Company’s quarterly
results of operations for the year ended 31st
December, 2001.
|
Statements
of Earnings
Figures in Baht '000 (except per share data) |
For
the Three Months Periods Ended
|
|
Dec
31, 2001
|
Sept
30, 2001
|
Jun
30, 2001
|
Mar
31, 2001
|
| Net
Sales |
658,515 |
553,884 |
487,459 |
459,314 |
| Cost
of Sales |
736,812 |
556,160 |
433,740 |
357,282 |
| Gross
Margin/(Loss) |
(78,297) |
(2,276) |
53,719 |
102,032 |
| %
Gross Margin |
(11%) |
(0.4%) |
11% |
22% |
|
Selling
& Administrative
Expenses
|
59,547 |
56,423 |
63,769 |
72,658 |
|
Restructuring and Severance Charges |
42,529 |
0 |
0 |
0 |
|
Director’s
remuneration
|
365 |
355 |
399 |
430 |
| Income/(Loss)
from Operations |
(180,738) |
(59,054) |
(10,449) |
28,944 |
| Other
(Income)/Loss |
(13,535) |
10,122 |
(5,638) |
(10,923) |
| Interest
Expense |
3,476 |
2,488 |
1,193 |
2,042 |
|
Impairment Loss |
154,872 |
0 |
0 |
0 |
| Corporate
Income Tax |
0 |
0 |
0 |
0 |
| Net
Income/(Loss) |
(325,551) |
(71,664) |
(6,004) |
37,825 |
| EBITDA |
(58,680) |
13,285 |
35,099 |
84,140 |
| Average
Number of Shares |
354,613 |
354,613 |
354,613 |
354,613 |
Net
Earnings/(Loss) Per
Share |
(0.91) |
(0.20) |
(0.02) |
0.11 |
|
Balance
Sheets
Figures in Baht '000
|
For
the Three Months Period Ended
|
| Dec
31, 2001 |
Sep
30, 2001 |
Jun
30, 2001 |
Mar
31, 2001 |
| ASSETS |
|
|
|
|
| Current
Assets |
|
|
|
|
| Cash in hand
and at banks |
55,042 |
302,778 |
345,166 |
750,926 |
|
Short-term investments
|
231,555 |
230,742 |
230,002 |
2 |
|
Account Receivable
– Trade, Net
|
520,599 |
405,877 |
282,543 |
180,249 |
|
Inventories – Net
|
292,004 |
243,824 |
151,886 |
145,378 |
|
Other Current
Assets
|
|
|
|
|
|
Advances
|
1,554 |
3,241
|
2,762
|
14,082
|
| Supply in Transit |
0 |
0
|
2,841
|
28
|
| Prepaid Expenses |
2,000 |
4,620
|
6,323
|
0 |
|
Others
|
11,247 |
9,295
|
954
|
3,084
|
| Total
Other Current Assets |
14,801 |
17,156 |
12,880 |
17,194 |
| Total
Current Assets |
1,114,001 |
1,200,377 |
1,022,477 |
1,093,749 |
| Loans
to Employees |
33 |
73 |
128 |
228 |
| Property,
Plant & Equipment- Net |
1,754,552 |
1,850,513 |
1,774,206 |
1,695,622 |
| Fixed
Assets Not Used in Operations- Net |
0 |
36,817 |
38,267 |
38,638 |
| Other
Assets |
|
|
|
|
| Deferred
License Fees - Net |
3,037 |
3,532 |
4,027 |
4,520 |
|
Others |
2,262 |
2,272 |
2,292 |
2,531 |
| Total
Other Assets |
5,299 |
5,804 |
6,319 |
7,051 |
| TOTAL
ASSETS |
2,873,885 |
3,093,584 |
2,841,397 |
2,835,288 |
| LIABILITIES
AND SHAREHOLDERS' EQUITY |
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
Bank Overdrafts and Loans
|
196,887 |
135,383
|
67,377
|
50,671
|
|
Accounts Payable - Trade
|
302,928 |
225,600 |
140,305 |
74,764 |
|
Accounts Payable - Others
|
78,263 |
121,728 |
63,175 |
140,757 |
|
Current Portion of Long Term Loan
|
23,000 |
23,000
|
0
|
0
|
| Current Portion of Liabilities Under
Finance Lease Agreement |
5,433 |
5,562 |
4,000 |
3,434 |
|
|
|
|
|
|
Other
Current Liabilities
|
|
|
|
|
|
Accrued Expenses
|
44,910 |
32,907 |
37,553 |
33,857 |
|
VAT
Payable
|
0 |
0
|
2,467 |
0
|
|
Others
|
1,887 |
1,905 |
1,939 |
1,803 |
| Total
Other Liabilities |
46,797 |
34,812 |
41,959 |
35,660 |
| Total
Current Liabilities |
653,308 |
546,085 |
316,816 |
305,286 |
| Long-Term
Lease |
10,732 |
12,103 |
9,522
|
8,939
|
| Long-Term
Loan - Net of Current Position |
92,000 |
92,000 |
0 |
0 |
| TOTAL
LIABILITIES |
756,040 |
650,188 |
326,338 |
314,225 |
| Shareholders'
Equity |
|
|
|
|
Share
Capital Registered
372,343,545 ordinary shares of Baht10
each |
3,723,435 |
3,723,435 |
3,723,435 |
3,723,435 |
| Issued
and Fully Paid-up Capital |
3,546,129 |
3,546,129 |
3,546,129 |
3,546,129 |
| Share
Premium |
(565,742) |
(565,742) |
(565,742) |
(565,742) |
| Retained
Earnings |
|
|
|
|
|
Appropriated - Statutory Reserve |
27,930 |
27,930 |
27,930 |
27,930 |
|
Deficit |
(890,472) |
(564,921) |
(493,258) |
(487,254) |
| Total
Shareholders' Equity |
2,117,845 |
2,443,396 |
2,515,059 |
2,521,063 |
| TOTAL
LIABILITIES & SHAREHOLDERS' EQUITY |
2,873,885 |
3,093,584 |
2,841,397 |
2,835,288 |
Statements of Cash Flows
(Figures in Baht '000) |
For
the Three Month Periods Ended
|
|
Dec
31,2001
|
Sept
30, 2001
|
Jun
30, 2001
|
Mar
31, 2001
|
| Cash
Flows from Operating Activities |
|
|
|
|
| Net
Earnings (Loss) |
(325,551)
|
(71,664)
|
(6,004)
|
37,825 |
| Adjustments
to reconcile net earnings (loss) to
net cash provided by operating
activities :- |
|
|
|
|
| Unrealized
Exchange (Gain) Loss |
(15,059)
|
14,340
|
1,772
|
(626) |
| Depreciation
and Amortization |
74,654
|
62,276
|
52,070
|
45,404 |
| Allowance for doubtful account |
17 |
0 |
0 |
0 |
| Provision
for obsolete stock |
33,868 |
20,185 |
(12,161) |
(1,131) |
| Provision
on impairment of fixed assets |
154,872 |
0 |
0 |
0 |
| Loss
from sales of fixed assets |
2,176 |
138 |
1 |
606 |
| Operating
assets (increase) decrease |
|
|
|
|
| (Incr)/Decr
in
Accounts Receivable - Trade
, Net |
(110,708) |
(125,928)
|
(106,277)
|
61,070 |
| (Incr)/Decr
in
Inventory - Net |
(82,047) |
(112,124)
|
5,654
|
(179) |
| (Incr)/Decr
in
Other Current Assets |
6,036 |
(6,742)
|
7,401
|
3,365 |
| Other
Asset s |
50
|
75
|
339
|
386 |
| Operating
liabilities increase (decrease)
|
|
|
|
|
| (Decr)/Incr
in
Accounts Payable - Trade
|
82,231
|
84,201
|
66,214
|
5,225 |
| (Decr)/Incr
in
Accounts Payable - Other |
(36,873)
|
48,282
|
(76,176)
|
19,022 |
| (Decr)/Incr
in
Other Current Liability
|
7,683
|
(4,681)
|
3,832
|
(5,456) |
| Net
Cash
from (used in)
Operating
Activities
|
(208,651) |
(91,641)
|
(63,335)
|
165,511
|
| Cash
Flows from Investing Activities
|
|
|
|
|
| (Incr)/Decr
in
Short-Term Investment |
(813) |
(740)
|
(230,000)
|
2 |
| Increase
in property, plant and equipment
|
(133,209) |
| | | | |
