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Deswell Announces Fourth Quarter Results

Deswell Industries, Inc. (Nasdaq: DSWL) today announced its financial results for the fiscal fourth quarter ended March 31, 2010.

Net sales for the fourth quarter ended March 31, 2010 were $16.7 million, a decrease of 39.1% compared to net sales of $27.4 million for the same quarter ended March 31, 2009. Net sales decreased by 37.4% to $9.1 million in the plastic segment and by 41.0% to $7.5 million in the Company’s electronic and metallic segment. The operating loss in the fourth quarter was $1.2 million, compared to an operating income of $0.2 million for the same quarter of fiscal 2009.

Total gross margin decreased to 12.6% in the fourth quarter ended March 31, 2010 compared to 15.8% in the same quarter last year. Gross profit in the plastic segment slightly increased to 21.9% of net sales for the fourth quarter of fiscal 2010 compared to 18.9% of net sales for the same quarter of last year. The increased gross margin in the plastic segment was mainly due to the reduction of sales of lower profit margin items, offsetting the higher labor costs and increase in factory overhead as a percentage of sales during the quarter. Gross profit margin in the electronic and metallic segment decreased to 1.2% of net sales for the fourth quarter ended March 31, 2010, compared to 12.4% of net sales for the year-ago quarter. The decrease in gross margin in the electronic and metallic segment was due mainly to an increase in raw material costs as a percentage of sales due to higher provisions for obsolete inventory, and in labor costs and factory overhead as a percentage of sales during the quarter.

The Company reported a net loss of $0.9 million for the fourth quarter ended March 31, 2010 compared to net income of $0.6 million for the quarter ended March 31, 2009. Basic net loss per share and diluted net loss per share were ($0.06) and ($0.06) respectively, (based on 16,190,000 and 16,203,000 weighted average shares outstanding, respectively) compared to earnings per share of $0.04 and $0.04 respectively, (based on 15,791,000 and 15,821,000 weighted average shares outstanding, respectively) for the same quarter ended March 31, 2009.

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