BenQ Corporation Q Investor Briefing

Transcription

1 BenQ Corporation Q Investor Briefing BenQ: Bringing Enjoyment and Quality to Life August 19, 2004

2 Meeting Overview Second Quarter Highlights Delivering Sustained, High Return-on-Investment Q3 Guidance & Q&A

3 Safe Harbor Notice We have made forward-looking statements in the presentation. Our forwardlooking statements contain information regarding, among other things, our financial conditions, future expansion plans and business strategies. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that these expectations and projections are reasonable, such forward-looking statements are inherently subject to risks, uncertainties, and assumptions about us. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events in the conference might not occur and our actual results could differ materially from those anticipated in these forward-looking statements.

4 Second Quarter Highlights

5 2Q 2004 Income Statement QoQ Analysis Amount : NT$ Billion Except EPS Data Q Q QoQ Change% Net Sales % % 0% Cost of Goods Sold (36.84) (87.3%) (37.25) (88.6%) 1% Gross Profit % % -11% Operating Expenses (4.04) (9.6%) (3.73) (8.9%) -8% Operating Income % % -19% Net Non-op Items % % 0% Income before Tax % % -8% Income Tax (0.23) (0.5%) (0.07) (0.2%) -69% Net Income % % -3% Fully Diluted EPS (NT$) % Projectors, Projectors, handsets handsets posting posting strong strong sales sales and and shipment shipment gains. gains. Overall OverallMoM MoMsales flat flat impacted impacted by by slowness slowness of of demand demand in in LCD LCD displays. displays. Gross Gross margin margin affected affected by by decreasing decreasing LCD LCD display display ASP s ASP s and and high high panel panel prices. prices. Core business, Unaudited, Prepared by BenQ Corp. on a consolidated methodology

6 1H 2004 Performance Comparison Amount : NT$ Billion Except EPS Data H H YoY Change% Net Sales % % 62% Cost of Goods Sold (44.10) (85.0%) (74.09) (87.9%) 68% Gross Profit % % 31% Operating Expenses (5.03) (9.7%) (7.77) (9.2%) 54% Operating Income % % -12% Net Non-op Items % % 700% Income before Tax % % 95% Income Tax (0.34) (0.7%) (0.30) (0.4%) -12% Net Income % % 108% Fully Diluted EPS (NT$) % Overall Overall sales sales grew grew 62% 62% YoY; YoY; net net income income 108%. 108%. Non-operating income income surged surged driven driven by by gains gains associated associated with with BenQ s BenQ s investments in in AUO. AUO. Core business, Unaudited, Prepared by BenQ Corp. on a consolidated methodology

7 2Q 2004 Balance Sheet Highlights Q Q Change % Cash & Equivalent % % -55% Accounts Receivable % % -4% Inventories % % 16% L-T Investments % % 8% Total Assets % % -1% Liabilities % % -2% ( Debt ) % % -24% Equities % % -1% Cash Cash balance balance lower lower than than Q1 s Q1 s end end following following NT$4.1 NT$4.1 billion billion cash cash dividend dividend and and repayment repayment of of short-term short-term financing. financing. Core business, Unaudited, Prepared by BenQ Corp. on a consolidated methodology

8 Key Financial Ratios Q Q Q A/R Turnover 50 days 46 days 47 days Inventory Turnover 47 days 44 days 48 days ROA* 11.1% 13.7% 12.9% ROE* 21.1% 26.2% 24.9% Total Debt / Total Assets 7.2% 8.7% 6.7% * Annualized ROE 11.1% 21.5% 17.3% ROE ROE on on target target to to exceed exceed 20%. 20%. Days Days receivables receivables on on par par with with Q1 Q1 level. level. Inventory Inventory lengthened lengthened slightly slightly on on seasonal seasonal dip dip in in demand. demand. Core business, Unaudited, Prepared by BenQ Corp. on a consolidated methodology

9 Sales Breakdown by Business Display Imaging & Storage Communications Digital Media 100% 80% 2% 32% 3% 31% 4% 27% 5% 20% 8% 15% 14% 16% 15% 17% 13% 22% 60% 25% 23% 22% 21% 21% 21% 17% 18% 40% 20% 41% 43% 47% 54% 56% 49% 51% 47% 0% 3Q'02 4Q'02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04 Networking & Communications saw saw a a record record level level of of handsets handsets shipped shipped in in June. June. Projector Projector shipment shipment in in June June also also reached reached an an all-time all-time high. high. Core business, Unaudited, Prepared by BenQ Corp. on a consolidated methodology

10 Sales Breakdown by Geography America Europe China (a) APAM (b) 100% 80% 23% 20% 22% 22% 23% 25% 27% 27% 60% 23% 23% 26% 18% 22% 16% 17% 15% 40% 29% 27% 22% 21% 20% 24% 26% 28% 20% 25% 30% 30% 39% 35% 35% 30% 30% 0% 3Q'02 4Q'02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04 Sales Sales of of BenQ's BenQ's European branded European branded products business products business grew grew for on for on the the back first back first time of time of the the in in second second quarter quarter on on the the company s company s back back of of the the UEFA UEFA company s company s EURO EURO UEFA 2004 UEFA 2004 EURO promotional efforts. promotional efforts. efforts. (a) Including HK (b) Asia Pacific, Africa, and Middle East Core business, Unaudited, Prepared by BenQ Corp. on a consolidated basis

11 Recap of Major Events and Impact Financing Events Securities and Futures Bureau (SFB) approved the issuance of up to NT$2.05 billion domestic straight bond. (2004/08/18) In relation to BenQ s share repurchase program, purchased million own shares(2004/03/ /04/02) Impact Expected improvement in current ratio. Secured longer-term fixed rate financing. Boosted cash returns to investors. Visit BenQ website ( for more details.

12 Recap of Major Events and Impact Operating Events BenQ began shipping its latest dualformat, 16x speed DVD±RW with Double-Layer technology (2004/08/04) BenQ s FP783 LCD Monitor won Bronze Medal at the 2004 IDEA (Industrial Design Excellence) Award (2004/07/12) BenQ sponsored UEFA EURO 2004 as the event s official IT partner. Impact BenQ first in the world to launch the 16x DVD drive with higher ASP. Innovative design enhancing branding awareness. Greatly added to awareness of the brand and boosted the confidence of channel partners. Visit BenQ website ( for more details.

13 EURO 2004 Update: Objectives: Strengthen partnership with dealers and distributors Increase brand awareness and elevate BenQ to a world-class brand Cost-effective marketing activities: Advertising and Presence Marketing Public Relations Fan Park Hospitality Program Results: Received high quality PR exposure in all markets, including Europe and Asia Pacific Increased presence in key European markets, such as UK, Germany, France, Spain, Italy, etc. through marketing and PR activities Strengthened channel relationships through customized hospitality programs Leveraging Leveraging the the power power of of multi-media communication and and the the internet, internet, BenQ BenQ reaching reaching more more branding branding milestones milestones sooner sooner than than larger larger competitors did did in in the the past. past.

14 Matches

15 Branding Revenues Full Steam Ahead Branding Revenue 24 % 29 % 31 % 2002 Total Revenue: NT$105 bln 2003 Total Revenue: NT$121 bln H Total Revenue: NT$84.2 bln Margins Margins expanding expanding in in a a number number of of BenQ BenQ branded branded products. products. Core business, Unaudited, Prepared by BenQ Corp. on a consolidated methodology

16 New Product Launches PB9200 The PB9200 projector, designed to be used at large venues, is equipped with an innovative motorized lens and features the capability to use a number of interchangeable lenses Joybee 102R Showcasing sensible geometric shapes and colors, the beautifully rounded Joybee 102R is designed to provide music lovers a chic and expressive way to enjoy music Joybee 180 Sporting a convenient carrying strap and interchangeable covers, the Joybee 180 sets itself apart from other digital audio players.

17 New Product Launches M300 The BenQ M300 features BenQ s first 65,536 color CSTN LCD display with Transmissive Micro Reflectance (TMR) technology, which significantly enhances brightness, contrast and color saturation of the display Joybook 7000 Featuring a spacious 14-inch wide-screen LCD, the Joybook 7000 is the world s first 14-inch wide-screen laptop PC DW1600, DW1620, and DW1610 BenQ s DW1600 series DVD re-writers features 16x speed recording and Double-Layer technology for increased convenience and storage capacity.

18 Delivering Sustained, High Return-on-Investment

19 Taking Care of Business and Shareholders According to a Recent Edition of Taiwan Business Weekly, in Terms of Friendliness to Investors, BenQ Ranks No. 3 Overall Amongst Taiwan s Top 50 Technology Companies Friendliness to Investors is Measured by Market Value of Employee Stock Bonus (ESB): BenQ No. 1 Share Dilution due to ESB: BenQ No. 3 Impact to Net Income if ESB Expensed: BenQ No. 2 Improvement/Deterioration in Share Dilution over Time: BenQ No. 2 Source: Watson Wyatt Worldwide BenQ BenQ No. No. 22 Overall in in Return-on-Investment between

20 Committed to Returning Cash to Shareholders Cash Payout Ratio Increasing year-on-year 23.4% % 34.0% 54.9% Cash Returned in 2004 Cash dividends---nt$4.1 billion Share repurchase---nt$196 million Cash Returned in 2003 Cash dividends---nt$2.5 billion Share repurchase---nt$1.3 billion Cash Distributed Beginning Cash dividends & share repurchase-- NT$10.3 billion BenQ BenQ increasing increasing cash cash returns returns to to investors investors as as Company Company generates generates more more free free cash. cash.

21 Extending Market Leadership & High Growth BenQ Products a Natural, Organic Extension of Existing Portfolio of Digital Lifestyle Products 150, ,000 90,000 60,000 30,000 0 (Source: Display Search, BenQ) 8,000 6,000 4,000 2,000 (Source: PMA, 2003Q4) 0 LCD Monitors 28% CAGR 70,033 50,923 97, , , BenQ No. 3 Globally 2464 Projectors 33% CAGR BenQ Top 5 (DLP Top 2) Globally Units 000 pieces except handsets: 000,000 pieces (Source: IDC, 2004) BenQ BenQ well-positioned to to extend extend industry industry leadership leadership and and execute execute above-market growth. growth. 270, , , , , , Handsets BenQ No. 9 Globally ODD Storage 178, ,500 8% CAGR 226, ,000 9% CAGR 250, ,000 (Source: TSR, 2003/11) BenQ No. 4 Globally

22 Q3 Guidance

23 2004 Q3 Guidance Q3 revenue outlook generally flat QoQ. Shipment should grow overall although ASP could trend down in the face of lowered panel price; margin will likely be adversely impacted as the company works down its panel inventory. Display : LCD monitor shipments to continue increasing driven by shifts in seasonal demand. Imaging & Storage : Revenue expected to grow over second quarter with the introduction world-leading 16x DVD±RW with Double-Layer technology. Communications : Shipments of own-brand handsets to increase and expected to deliver enhanced ASP and margins, though total handset shipment will likely be down. Digital Media : Notebook and MP3 to see slight growth; projector flat to down slightly following strong first half 2004.

24

25 BenQ Corporation. Unaudited Core Business Consolidated Balance Sheet JUN. 30, 2004 UNIT : NT$K Assets Liabilities & stockholders' equity Current assets : Liabilities Cash & cash equivalent 3,194, % Short term borrowings 3,907, % Short term investment 1,936, % N/P & A/P 22,161, % Net notes and accounts receivable 19,520, % N/P & A/P to related partie 7,860, % N/R & A/R from related parties 1,775, % Bond payable 1, % Net inventories 21,514, % Acurred exp. & other current liab. 8,023, % Prepaid expenses & other current assets 3,729, % Total current liabilities 41,953, % Total current assets 51,671, % Long term loan 5, % Long term investments 26,672, % Bond payable 2,258, % Fixed assets : 18,648, % Other liabilities 96, % Less : Accumulated depreciation (5,760,715) 6.3% Total liabilities 44,314, % Total fixed assets 12,887, % Stockholder' equities 0 Other assets 851, % Common stock 23,148, % Treasury stock (79,019) -0.1% Capital surplus 14,452, % Legal reserve 3,254, % Retained earnings 6,569, % Translation adjustment 422, % Total stockholder' equities 47,768, % Total Assets $ 92,083, % Total Liabilities & stockholders' equity $ 92,083, % BenQ Corporation. Unaudited Core Business Consolidated Income Statement June UNIT : NT$K Net sales $ 84,284, % Cost of goods sold (74,090,259) -87.9% Gross profit 10,194, % Operating expense : 0 S & M (4,844,381) -5.7% G & A (1,017,919) -1.2% R & D (1,910,518) -2.3% Total Operating expense (7,772,819) -9.2% Operating income (loss) 2,421, % Non-operating in net income(loss) 3,921, % Earning Before income tax 6,343, % Income tax (298,829) -0.4% Minority interest in net income (loss) 0 0.0% Profit after tax $ 6,044, %

26 BenQ Corporation Nonconsolidated Balance Sheets June 30, 2004 and 2003 (expressed in thousands of New Taiwan dollars) Assets NT$ NT$ Current assets: Cash and cash equivalents 564, ,149 Short-term investments 307,774 8,752,059 Notes and accounts receivable 9,581,175 5,111,043 Receivables from related parties 21,530,924 16,212,727 Other financial assets 302, ,128 Inventories 5,739,783 4,032,242 Prepaid expenses and other current assets 364, ,487 Deferred income tax assets-current 1,173, ,583 Total current assets 39,564,595 35,322,418 Long-term equity investments: Equity method 30,740,813 24,175,723 Cost or lower-of-cost-or-market method 2,144,978 2,426,689 32,885,791 26,602,412 Property, plant and equipment: Land 2,356,164 2,265,826 Buildings 3,926,269 4,187,414 Machinery and equipment 2,350,245 2,251,405 Furniture and fixtures 139, ,663 Miscellaneous equipment 67,262 69,391 Prepayments for plant and equipment 230, ,880 9,070,403 9,074,579 Less: accumulated depreciation (2,338,412) (1,911,708) Net property, plant and equipment 6,731,991 7,162,871 Other assets: Rental assets 512,463 - Refundable deposits 7,093 6,747 Deferred assets 95, ,553 Deferred income tax assets-noncurrent 56,499 48,956 Total other assets 671, ,256 Total assets 79,853,969 69,277,957

27 BenQ Corporation Nonconsolidated Balance Sheets June and 2003 (expressed in thousands of New Taiwan dollars) Liabilities and Stockholders Equity NT$ NT$ Current liabilities: Short-term borrowings 151, ,752 Current portion of long-term debt - 20,095 Accounts payable 7,750,340 3,631,326 Payables to related parties 16,342,353 13,017,184 Bonds payable 1,400 2,201,700 Accrued expenses and other current liabilities 4,318,224 6,387,770 Income taxes payable 468,563 95,491 Deferred inter-company profit 331, ,026 Total current liabilities 29,364,330 26,021,344 Bonds payable 2,258,891 1,378,544 Other liabilities 462, ,983 Total liabilities 32,085,377 27,943,871 Stockholders equity: Common stock: Common stock 23,148,990 20,671,612 Capital surplus: Additional paid-in capital in excess of the common stock s par value 5,152,848 5,238,950 Convertible bonds converted in excess of the common stock s par 7,104,453 6,461,269 value Capital surplus from treasury stock transactions 134 2,981 Capital surplus from long-term equity investments 2,194,672 1,488,148 14,452,107 13,191,348 Legal reserve 3,254,424 2,504,415 Retained earnings 6,569,397 4,341,528 Translation adjustment 422, ,972 Treasury stock (79,019) (79,789) Total stockholders equity 47,768,592 41,334,086 Total liabilities and stockholders equity 79,853,969 69,277,957

28 BenQ Corporation Nonconsolidated Statements of Income Six-month periods ended June 30, 2004 and 2003 (expressed in thousands of New Taiwan dollars, expect earnings per share) NT$ % NT$ % Net sales 78,700, ,355, Cost of goods sold (71,497,121) (91) (41,236,853) (89) 7,203, ,118, Change in unrealized intercompany profits (163,902) - (7,818) - Gross profit 7,039, ,111, Operating expenses: Selling (1,874,435) (2) (1,452,901) (3) Administrative (494,163) (1) (432,055) (1) Research and development (1,819,336) (2) (1,147,386) (3) (4,187,934) (5) (3,032,342) (7) Operating income 2,851, ,078,706 4 Nonoperating income: Interest income 2,644-11,349 - Investment income recorded under the equity 3,375, ,814 2 method, net Dividend income 170, ,822 1 Gain on disposal of property, plant and equipment 1, Gain on disposal of investments, net 57, ,168 - Foreign exchange gain, net 132, ,153 - Others 84,374-63,145-3,825, ,328,403 3 Nonoperating expense: Interest expense (65,749) - (88,398) - Impairment loss on long-term equity investment (250,000) Loss on disposal of property, plant and equipment (2,867) - (21,253) - Others (2,937) - (8,013) - (321,553) - (117,664) - Net income before income tax expense 6,355, ,289,445 7 Income tax expense (310,855) - (379,805) (1) Net income 6,044, ,909,640 6 Basic earnings per share Diluted earnings per share

29 BenQ Corporation Nonconsolidated Statements of Changes in Stockholders Equity Six-month period ended June 30, 2004 and 2003 (expressed in thousands of New Taiwan dollars) Common Stock Convertible Bonds Applies for Conversion Capital Surplus Legal Reserve Retained Earnings Translation Adjustment Treasury Stock Total Balance at January 1, ,810,510-13,296,073 1,764,452 8,721, ,083 (79,923) 41,278,322 Net income for the six-month period ended June 30, ,909, ,909,640 Appropriation of earnings: Legal reserve ,963 (739,963) Retained earnings transferred to common stock 3,362, (3,362,102) Employee bonuses transferred to common stock 499, (499,000) Cash dividends (2,521,577) - - (2,521,577) Bonuses for employees (100,000) - - (100,000) Remuneration of directors and supervisors (66,597) - - (66,597) Change in treasury stock held by subsidiaries Adjustments of net equity of investee companies - - (104,725) (104,725) Translation adjustment (61,111) - (61,111) Balance at June 30, ,671,612-13,191,348 2,504,415 4,341, ,972 (79,789) 41,334,086 Balance at January 1, ,383,612 13,436 13,578,276 2,504,415 8,931, ,861 (881,619) 45,461,964 Net income for the six-month period ended June 30, ,044, ,044,577 Appropriation of earnings: Legal reserve ,009 (750,009) Retained earnings transferred to common stock 2,061, (2,061,962) Employee bonuses transferred to common stock 455, (455,630) Cash dividends (4,123,924) - - (4,123,924) Bonuses for employees (50,626) - - (50,626) Remuneration of directors and supervisors (67,501) - - (67,501) Convertible bonds converted to common stock 137,356 (13,436) 298, ,846 Acquisition of treasury stock (651,354) (651,354) Retirement of treasury stock (344,570) - (211,698) - (897,511) - 1,453,779 - Change in treasury stock held by subsidiaries Cash dividends paid to subsidiaries which hold the Company s shares Adjustments of net equity of investee companies , ,469 Translation adjustment (54,168) - (54,168) Balance at June 30, ,148,990-14,452,107 3,254,424 6,569, ,693 (79,019) 47,768,592

30 BenQ Corporation Nonconsolidated Statements of Cash Flows Six-month periods ended June 30, 2004 and 2003 (expressed in thousands of New Taiwan dollars) NT$ NT$ Cash flows from operating activities: Net income 6,044,577 2,909,640 Adjustments to reconcile net income to net cash provided by (used in ) operating activities: Depreciation 289, ,097 Amortization 39,169 47,468 Change in allowance for doubtful accounts 22,616 (43,525) Change in provision for inventory obsolescence (15,942) (5,132) Investment income on long-term equity investments, net (3,375,682) (822,814) Cash dividends received from investees accounted for by equity method - 24,400 Gain on disposal of short-term equity investments (69,920) - Loss on disposal of long-term investments 11,975 - Impairment loss on long-term equity investment 250,000 - Loss on disposal of property, plant and equipment, net 1,718 20,301 Loss on physical count of fixed assets Fixed assets transferred to expenses - 2,400 Unrealized foreign exchange gain on overseas convertible bonds (9,279) (5,730) Reversal for redemption of overseas convertible bonds (6,334) (4,514) Amortization of bond issuance costs 533 2,997 Differences in accounts in the accompanying balance sheets: Notes and accounts receivable (1,301,202) 1,113,160 Receivables from related parties (780,944) (1,615,972) Inventories (259,336) (792,431) Other financial assets-current (203,003) (214,859) Prepaid expenses and other current assets (65,625) (8,820) Accounts payable 786,884 (2,422,468) Payables to related parties 215, ,474 Deferred inter-company profit 163,902 7,818 Accrued expenses and other current liabilities (358,830) (198,807) Income tax payable 407,199 (670,493) Deferred income tax assets (224,759) 228,798 Other liabilities (9,552) (9,552) Net cash provided by (used in) operating activities 1,554,643 (1,992,699) Cash flows from investing activities: Additions to long-term investments (296,131) (440,772) Decrease (increase) in short-term investments 3,242,667 1,036,536 Additions to property, plant and equipment (214,364) (194,914) Proceeds from disposal of property, plant and equipment 7, Additions to refundable deposits and deferred assets (5,247) (51,317) Proceeds from investees capital reduction 26,147 57,484 Net cash provided by (used in) investing activities 2,760, ,474 Cash flows from financing activities: Decrease in long-term debt - (20,095) Decrease in short-term borrowings 151,988 (105,977) Redemption of convertible bonds (200,300) (131,625) Acquisition of treasury stock (651,354) - Payment of cash dividends (4,123,924) - Directors and supervisors remuneration (67,501) (66,597) Net cash provided by (used in) financing activities (4,891,091) (324,294) Net decrease in cash and cash equivalents (575,526) (1,909,519) Cash and cash equivalents at beginning of period 1,139,573 2,025,668 Cash and cash equivalents at end of period 564, ,149 Additional disclosure of cash flow information: Cash paid during the periods for: Interest, excluding capitalized interest 49,372 20,636 Income taxes 128, ,500 Supplemental disclosure of noncash investing and financial activities: Unpaid cash dividends reported as accrued expenses - 2,521,577 Unpaid employee bonus reported as accrued expense 50, ,000 Increase (decrease) in capital surplus from long-term equity investments 786,469 (104,725) Decrease in translation adjustment (54,168) (61,111) Convertible bonds transferred to common stock and capital surplus 422,846 -