Deswell Industries, Inc. (Nasdaq: DSWL) today announced its financial results for the fiscal second quarter ended September 30, 2010.

Net sales for the second quarter ended September 30, 2010 were $24 million, an increase of 15.2% compared to net sales of $20.8 million for the same quarter ended September 30, 2009. Net sales increased by 6.3% to $13.1 million in the plastic segment and by 28.1% to $10.9 million in the Company’s electronic and metallic segment. The operating loss in the second quarter of fiscal 2011 was $1.7 million, compared to an operating income of $2.9 million for the same quarter of fiscal 2010.

Total gross margin decreased to 12.0% in the second quarter ended September 30, 2010 compared to 13.9% in the same quarter last year. Gross profit margin in the plastic segment decreased to 10.5% of net sales for the second quarter of fiscal 2011 compared to 15.5% of net sales for the same quarter of last fiscal year. The decreased gross margin in the plastic segment was mainly due to an increase in labor costs resulting from a raise in the minimum wage rate, increases in overtime allowance and headcount, as well as an increase in factory overhead as a percentage of sales during the quarter. Gross profit margin in the electronic and metallic segment increased to 14.0% of net sales for the second quarter ended September 30, 2010, compared to 11.6% of net sales for the year-ago quarter. The increase in gross margin in the electronic and metallic segment was mainly attributable to an increase in sales revenues, and savings in raw materials resulting from improvements in material usage which offset increased labor costs which were driven by increases in the minimum wage rate, headcount and overtime allowance, as compared to prior year quarter.

The Company reported a net loss of $1.6 million for the second quarter ended September 30, 2010 compared to net income of $3.1 million for the quarter ended September 30, 2009. Basic and diluted net loss per share was ($0.10), (based on 16,194,000 and 16,205,000 weighted average shares outstanding, respectively) compared to basic and diluted net income per share of $0.20, (based on 15,880,000 and 16,016,000 weighted average shares outstanding, respectively) for the same quarter ended September 30, 2009.