D-Link 2001 Annual Report Download

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Table of contents

  • Page 1

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    Table of Contents Financial Highlights...01 Letter to Shareholders...02 Sales/Marketing...06 Manufacturing...08 Facilities...08 Quality...10 Technology...12 Networks...12 Wireless...14 Broadband...16 IP Telephony...17 Global Presence...18-1 19 Board of Directors...20 Financials...21

  • Page 3
    ... exchange rate for 2001 NT$31.29= US$1, the average annual exchange rate for 2000 NT$32.34= US$1, the average annual exchange rate for 1999 (U.S. Dolla rs in Thousa nds) Cash & Cash Equivalents T otal Assets Working Capital Long-T erm Loans T otal Shareholders Equity Shares Outstanding** 2001...

  • Page 4
    ... the Ethernet platform. While the wired LAN solutions continued to be core product offerings, we also strengthened our wireless LAN (802.11a, 802.11b and bluetooth), broadband access (Asynchronous Digital Subscriber Line and Cable Modems), Voice over Internet Protocol(VoIP), and residential gateway...

  • Page 5
    ... world-class quality products for accessing the Internet. Our development and delivery of Gigabit Ethernet adapters and switches, WLAN adapters, access points and routers, digital home gateways, and integrated broadband devices have led the way for a wide range of small and medium enterprises, homes...

  • Page 6
    ... the very challenging industry environment. The management team made great efforts to bring down global inventory during this tough period to the lowest level in the past three years, with the implementation of a global Enterprise Resource Planning (ERP) system. As a result, cash cycle improved to...

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    5

  • Page 8
    ...and accolades underscore the quality, reliability and technical excellence that D-Link engineers build into the Company's products. This past year, the Company reshaped its consumer look to reflect the quality inside the products by creating a new design for its retail line that employs a futuristic...

  • Page 9
    ...to driving technology to the edge that is at the heart of the company's success. contract with us to help design and develop technology. We have teams of engineers who are dedicated to developing the reference Excellent engineering resources, and manufacturing capacity combined designs for new chip...

  • Page 10
    ...World Class D-Link is a world-class manufacturing company. With more than a million two hundred thousand square feet of manufacturing space and capability, an equally impressive range of high-tech manufacturing machinery and test equipment, and extremely well trained people, the Company is in a good...

  • Page 11
    ... Taiwan headquarters. The China plant also provides the benefits of inexpensive labor and cost-effective product components. In addition, a common language and culture with the head office enables the company to easily achieve expansion and economy of scales. The Goa manufacturing facility in India...

  • Page 12
    ...for manufacturing. These certifications outline a guide for quality products and have become an international reference for quality requirements business dealings. in business to The ISO 14001 designation certifies that the Company has demonstrated a successful Environmental Management Systems (EMS...

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  • Page 14
    ... an Ethernet connection. coming years. PC Magazine recognized the quality D-Link delivers with an Editors' Choice 10/100 Fast Ethernet First proposed in 1992, Fast Ethernet has become the high-speed technology for today's LANs and corporate desktop users. This IEEE standards-based technology has...

  • Page 15
    ... for enterprise network environments D-Link Fast Ethernet products are a dominant force in home and business environments alike; delivering increased network performance, increased network scalability, and decreased costs over time. Working closely with Internet Service Providers allows the Company...

  • Page 16
    .... Digital Home D-LinkAir wireless offers a wide range of connectivity solutions for the home with multiple interface technologies such as PCI, USB, PC Card and Ethernet. Strict compliance to the IEEE 802.11b networking standard within the 2.4GHz frequency range for wireless connectivity, means that...

  • Page 17
    ... powerful new D-Link AirPro products offer high-speed data rates at up to 54Mbps in standard mode, and 72Mbps in "Turbo" mode. Typical IT professionals at the enterprise and departmental level deploy wireless technology to extend and support users. This Wireless Personal Area Network connectivity...

  • Page 18
    ... D-Link, design, engineer and manufacture the technology that provides the physical access. Today, D-Link high-speed modem products find their way to many consumers in the home and business through network service providers. The Company also sells broadband and Internet connectivity products through...

  • Page 19
    ... close watch on the future, D-Link is deep into the development of emerging technologies. In 2001, D-Link was one of the first to deliver a Universal Plug-n-Play enabled residential gateway and an affordable Virtual Private Networking router solution. The Company works closely with service providers...

  • Page 20
    ...position in a wide range of geographically diverse markets. The Company has opened more overseas subsidiaries, branch offices and warehousing facilities to increase the level of local support. With a wellestablished global distribution network, 29 sales offices in 21 countries, D-L Link is currently...

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    19

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    ...link.co.za Singapore 1 International Business Park #03-12 The Synergy Singapore 609917 TEL: 65-6774-6233 FAX: 65-6774-6322 URL: www.dlink-intl.com... www.dlink-france.fr Taiwan 2F, No. 233-2 Pao-Chiao Road Hsin-Tien, Taipei, Taiwan TEL: 886-2-2910-2626 FAX: 886-2-2910-1515 URL: www.dlink.com.tw ...

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    D-LINK CORPORATION AND SUBSIDIARIES Consolidated Financial Statements December 31, 2000 and 2001 (With Independent Auditors' Report Thereon)

  • Page 25
    ... opinion, insofar as it relates to the amounts included for D-Link Corporation, is based solely on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the Republic of China. Those standards require that we plan and perform the audit...

  • Page 26
    March 25, 2002 See accompanying notes to consolidated financial statements.

  • Page 27
    D-LINK CORPORATION AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 2000 and 2001 (In thousands of New Taiwan dollars, except for net income per common share) 2000 Sales (note 17) Cost of goods sold (note 17) Net changes in unrealized inter-company profits Gross profit ...

  • Page 28
    ...,591 Receivables from related parties (note 17) 180,715 Inventories (note 6) 3,233,080 Prepaid expenses and other current assets (note 15) 505,584 Total current assets 9,341,507 Long-term equity investments (notes 7 and 17) 2,456,835 Property, plant and equipment (note 9): Land 100,922 Buildings and...

  • Page 29
    ...(note 10) $ 1,945,993 Commercial paper payable (note 11) 335,683 Notes and accounts payable 1,675,865 Payables to related parties (note 17) 426,573 Accrued...14): Common stock 3,788,466 Certificates for conversion of convertible bonds Capital surplus 3,200,537 Legal reserve 344,784 Special reserve 275,...

  • Page 30
    D-LINK CORPORATION AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 1999 and 2000 (In thousands of New Taiwan dollars) Common stock $ Balance at January 1, 2000 Appropriation of earnings: Legal reserve Directors and supervisors' remuneration Stock...

  • Page 31
    ... 2,821,407 Legal reserve 274,396 70,388 344,784 82,969 427,753 Special reserve 275,530 275,530 275,530 Unappropriated earnings 712,026 (70,388) ...125) 1,194,350 Foreign currency translation adjustment 3,546 47,633 51,179 48,952 100,131 Total stockholders' equity 6,594,101 (12,670) (306,275) (4,187) ...

  • Page 32
    ... of common stock for cash Payments of cash dividend, directors and supervisors' remuneration and employees' bonuses Increase (decrease) in short-term borrowings and commercial paper payable Issuance of bonds payable Others Cash provided by financing activities Effect of exchange rate changes on...

  • Page 33
    ... to their primary business activities. (a) Sale of local area network systems and maintenance service: Percentage of Ownership at December 31, 2000 2001 D-Link Systems, Inc. ("DSI") D-Link Europe Ltd. ("DEL") D-Link Canada Inc. ("DCI") D-Link International Pte. Ltd. ("DIL") D-Link Japan K.K. ("DJKK...

  • Page 34
    2 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements

  • Page 35
    ..., costs and expenses, which are translated at the weighted-average exchange rates during the reporting period. Translation differences resulting from the translation of such financial statements into New Taiwan dollars are recorded as a foreign currency translation adjustment, a separate component...

  • Page 36
    4 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements D-Link considers all highly liquid investments, such as investments in bonds with repurchase agreements, with a maturity of three months or less to be cash equivalents.

  • Page 37
    ... of the period, and the average closing price of the last month of the period for publicly listed securities. (5) Allowance for doubtful accounts Allowance for doubtful accounts is provided based on the expected collectibility of trade receivables. (6) Inventories Inventories are stated at the lower...

  • Page 38
    ... as deferred expenses and are amortized over periods ranging from three to five years, on a straight-line basis. Issue costs of convertible bonds with a redemption right are amortized by using the straight-line method over the period from the bond issue date to the expiration date of the redemption...

  • Page 39
    ... all regular employees in Taiwan. In accordance with the Plan, employees are eligible for retirement or are required to retire after meeting certain age or service requirements. Payments of retirement benefits are based on years of service and the average salary for the six-month period before...

  • Page 40
    8 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements more likely than not that the deferred tax assets will not be realized, a valuation allowance is recognized accordingly.

  • Page 41
    ... per share, the denominator should include common stocks, potentially dilutive common stock equivalents and potentially dilutive securities assumed to be totally converted that are not common stock equivalents. In addition to common stock, both the zero coupon convertible bonds issued in 2001 and...

  • Page 42
    ... below: 2000 Publicly listed stocks Mutual funds Less: allowance for decline in market value Market value $ 36,635 52,121 (27,401) 61,355 61,355 2001 28,373 1,315,356 (15,353) 1,328,376 1,328,376 $ $ 5. Notes and Accounts Receivable The components of notes and accounts receivable as of December...

  • Page 43
    ...233,080 $ 2,914,898 Investee Equity method: D-Link India Ltd. Digital China Networks, Ltd. (DCNL) Cameo Communication, Inc. (CCI) Abocom Systems, Inc. (ACS) Dray Tek Corp. Bothand Enterprise Inc. (BEI) Others Cost method: Z-Com,Inc. (Z-Com) Tamarack Micro electronics Inc. Others Advance payment for...

  • Page 44
    ... method: D-Link India Ltd. Digital China Networks, Ltd. (DCNL) Cameo Communication, Inc. (CCI) Abocom Systems, Inc. (ACS) Dray Tek Corp. Bothand Enterprise Inc. (BEI) Others Cost method: Articula Corporation Z-Com,Inc. (Z-Com) Tamarack Micro electronics Inc. Others December 31, 2001 Percentage of...

  • Page 45
    ... for Lease In order to expand future capacity, D-Link purchased a plant located in Hsinchu Science-based Industrial Park and entered into a land lease agreement with the Science Park Bureau. The duration of the land lease agreement is from August 2001 to December 2020. Before the commencement of re...

  • Page 46
    ...1999. Issue price: at par value. Duration: seven-years, maturing on September 27, 2006. Coupon rate: 0% Conversion objective: D-Link' s common stock. Conversion price: The conversion price was 64.2 New Taiwan dollars per share when the bonds were issued. As of July 18, 2001, the conversion price was...

  • Page 47
    ... date: March 21, 2001. Issue price: at par value. Duration: five-years, maturing on March 21, 2006. Coupon rate: 0% Conversion objective: D-Link' s common stock or global depository receipts (GDRs). Conversion period: The bondholders may exercise their conversion right at any time during the period...

  • Page 48
    ... guaranteed straight bonds Par value: $600 million. Issue date: December 24, 2001. Issue price: at par value. Duration: three-years, maturing on December 24, 2004. Coupon rate: 2.65%, interest paid annually on December 24. Issue terms: the principal of the bonds will be fully paid at one time...

  • Page 49
    ... agreement. D-Link intends to use long-term credit facilities to finance such redemption if needed. 13. Retirement Plans The following table sets forth the benefit obligation and accrued pension balance related to D-Link' s and DTI' s retirement plan as of December 31, 2000 and 2001: 2000 Benefit...

  • Page 50
    ...employee bonuses of $232,769, $226,644 and $75,000, respectively. The capital increase was registered in June 2000. Based on a resolution at the meeting of the board of directors held on June 28, 2000, D-Link issued 9,360,000 shares of common stock for cash at sixty-nine New Taiwan dollars per share...

  • Page 51
    ... be removed from special reserve and transferred to unappropriated earnings. D-Link has adopted the remaining dividend policy base on the industry environment, business growth and long-term financial planning. D-Link consider the capital budget to determine the distribution of stock dividends and...

  • Page 52
    20 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements

  • Page 53
    ... for the Establishment and Administration of the Science-based Industrial Park. Therefore, D-Link is entitled to an income tax exemption on the profits generated from certain operations over a period of four or five years. Such operations relate to the expanded operations accompanying the following...

  • Page 54
    ...returns of D-Link for all fiscal years through December 31, 1998. (d) According to the local Income Tax Law, losses of D-Link Europe as assessed by tax authorities can be carried forward to set off future years' taxable profits. As of December 31, 2001, the unused loss carryforwards of D-Link Europe...

  • Page 55
    ... contracts are reputable financial institutions. Therefore, management believes that the risk of default by the counter-parties is remote. (a) Foreign currency option contracts As of December 31, 2000 and 2001, D-Link had the following foreign currency option contracts outstanding: 2000 Contract...

  • Page 56
    ...USD2,000 USD2,000 Maturity 2002 02.27 02.27 03.04 Pay rate Three month USD LIBOR Three month USD LIBOR Three month USD LIBOR Receive rate 2.10% 3.20% 2.08% Receive rate 5.00% 5.00% 5.08% 5.05% 5.17% As of December 31, 2000 and 2001, the details of currency and interest swap balances were as follows...

  • Page 57
    .... As a result, market price risk is considered low. (iii) Liquidity risk Liquidity risk is the risk of being unable to settle derivative contracts on schedule. The purpose of these instruments held by D-Link was to manage and hedge the floating interest rate and foreign currency rate. There is no...

  • Page 58
    ... when these investments are not publicly traded. (d) Except for the first issuance of domestic guaranteed straight bond, the fair values of bonds payable are based on quoted market prices. The fair values of non-derivative financial instruments as of December 31, 2000 and 2001, are shown below: 2000...

  • Page 59
    ... are shown below: Name D-Link India Ltd. (DIL) Abocom Systems, Inc. (ACS) Cameo Communications, Inc. (CCI) Bothand Enterprise Inc. (BEI) Digital China Networks, Ltd. (DCNL) W-Link System Inc. (WSI) PowerCom Technology Co., Ltd. (PCTCL) Cellvision System Inc. (CSI) Dray Tek Corp. (DTC) Relationship...

  • Page 60
    ... 79,223 151,654 100,886 87,498 159,071 2,682,293 13 4 1 1 1 1 1 22 There are no significant differences in purchasing terms between related parties and third-party suppliers. (c) Accounts receivable/payable 2000 Percentage 4 1 1 6 2001 Percentage 7 1 8 Amount Accounts receivable: DCNL DIL Others...

  • Page 61
    29 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements D-Link paid service fee to DIL amounted to $32,062 in 2001. As of December 31, 2001, the related balance was not yet paid.

  • Page 62
    ...: Pledged assets Time deposits Pledged to secure Customs guarantees of the $ Science-based Industrial Park 2000 7,300 2001 7,300 19. Commitments and Contingencies (1) Major Operating Leases According to current leasing contracts, the minimum future leasing expenses of the land and offices leased by...

  • Page 63
    31 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements agent, is responsible for D-Link' s triangular trading activities with D-Link' s affiliates located in the People' s Republic of China ("PRC").

  • Page 64
    ... 31, 2001, D-Link had received grants amounting to $52,049 under the first and second phases of the plan. (5) D-Link entered into several royalty agreements with certain companies. According to these agreements, D-Link is obligated to pay royalties when D-Link sells products using the technologies...

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    33 D-LINK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements

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    ... 21. Segment Financial Information (1) Industry information D-Link and its subsidiaries principally operate in one industry segment, network communication products. (2) Geographic information The geographical breakdown of sales for the years ended December 31, 2000 and 2001, is summarized as follows...

  • Page 67
    ... Road VII Science-based Industrial Park Hsin-chu, Taiwan, R.O.C. TEL: 886-2-2916-1600 FAX: 886-2-2914-6299 URL: www.dlink.com.tw Board of Directors Chairman of the Board Ken Kao D-Link Corporation Vice Chairman of the Board John Lee D-Link Corporation Director DLK Holding Company LLC Director Delta...

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