Deswell Announces Fourth Quarter Results

Net sales for the year ended March 31, 2011 were $84.0 million, an increase of 3.0%, compared to sales of $81.6 million for the corresponding period in fiscal 2010. Operating loss for the year ended March 31, 2011 was $8.8 million, compared to operating income of $1.7 million for the fiscal year of 2010. The Company reported a net loss of $8.1 million in the fiscal year 2011, compared to net income of $1.5 million for the year ended March 31, 2010. Deswell reported basic and diluted net loss per share of $0.50 for the fiscal year of 2011, (based on 16,193,000 and 16,203,000 weighted average share outstanding, respectively), compared to income per share of $0.09, (based on 15,965,000 and 16,039,000 weighted average shares outstanding, respectively), for the prior fiscal period.

The Company's financial position remained strong at the end of the fourth quarter of fiscal 2011, with $35.6 million in cash and cash equivalents at March 31, 2011 compared to $35.1 million at March 31, 2010. Working capital totaled $59.7 million as of March 31, 2011 versus $59.8 million as of March 31, 2010. Furthermore, the Company has no long-term or short-term borrowings at March 31, 2011.

Mr. Franki Tse, chief executive officer, commented, “We are very pleased with the improved sales and margins at our electronic and metal segment. Our plastic segment experienced lower sales and margins largely due to its higher sensitivity to labor rates and RMB appreciation. Importantly, we have negotiated and confirmed price increases with some customers and believe this will positively effect to our gross margin. Increasing manufacturing cost and RMB appreciation, coupled with an uncertain world economic situation are still the main challenges we face. That being said, we are very focused on driving our sales performance and maximizing our margins for shareholders. As can be seen in our performance, we have taken great strides in reducing our overhead and expenses. I am encouraged by our progress and confident that our performance will be further improving in the coming 2011/2012 fiscal year. Since the company’s public listing in 1995, we have maintained a very sound financial condition -- a key competitive advantage for us -- with a healthy cash position and no short or long term debt.”

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