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Deswell Announces Third Quarter Results

Deswell Industries, Inc. (Nasdaq: DSWL) today announced its financial results for the fiscal third quarter ended December 31, 2011.

Net sales for the third quarter ended December 31, 2011 were $16.2 million, a decrease of 31.0% compared to net sales of $23.5 million for the same quarter ended December 31, 2010. Net sales decreased by 36.4% to $7.3 million in the Company’s plastic segment and by 25.9% to $8.9 million in the electronic and metallic segment. The operating loss in the third quarter was $0.4 million, compared to an operating loss of $4.0 million for the same quarter of fiscal 2011.

Total gross margin increased to 14.6% in the third quarter ended December 31, 2011 compared to 14.1% in the same quarter last year. Gross profit margin in the plastic segment decreased to 19.1% of net sales for the third quarter of fiscal 2012 compared to 24.8% of net sales for the same quarter of last fiscal year. The decreases of gross profit and margin in the plastic segment were mainly due to an increase in raw materials cost due to a price increase for plastic resin, and an increase in factory overhead as a percentage of net sales. Gross profit margin in the electronic and metallic segment increased to 10.9% of net sales for the third quarter ended December 31, 2011 compared to 3.9% of net sales for the year-ago quarter. The increase in gross margin in the electronic and metallic segment was mainly related to relatively less inventory purchased than in the prior fiscal quarter, offsetting an increase in labor cost due to higher contract labor cost for replacing lower headcount as well as an increase in factory overheads.

The Company reported net income of $91,000 for the third quarter ended December 31, 2011 compared to a net loss of $3.6 million for the quarter ended December 31, 2010. Deswell reported basic and diluted earnings per share of $0.006, (based on 16,197,000 and 16,198,000 weighted average shares outstanding, respectively) compared to basic and diluted net loss per share of ($0.22), (based on 16,195,000 and 16,203,000 weighted average shares outstanding, respectively) for the same quarter ended December 31, 2010.

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