Deswell Announces First Quarter 2013 Results

Deswell Industries, Inc. (Nasdaq: DSWL) today announced its financial results for the fiscal first quarter ended June 30, 2012.

Net sales for the first quarter ended June 30, 2012 were $14.5 million, a decrease of 20.9% compared to net sales of $18.3 million for the same quarter ended June 30, 2011. Net sales decreased by 15.6% to $7.1 million in the Company’s plastic segment and by 25.5% to $7.4 million in the electronic and metallic segment. The operating loss in the first quarter was $0.3 million, compared to an operating income of $0.1 million for the same quarter of fiscal 2011.

Total gross margin decreased to 15.4% in the first quarter ended June 30, 2012 compared to 17.3% in the same quarter last year. Gross profit margin in the plastic segment decreased to 19.1% of net sales for the first quarter of fiscal 2013 compared to 22.8% of net sales for the same quarter of last fiscal year. The decrease of gross profit and margin in the plastic segment was mainly due to increases in raw materials cost and factory overheads as a percentage of net sales. Gross profit margin in the electronic and metallic segment decreased to 12.0% of net sales for the first quarter ended June 30, 2012 compared to 12.6% of net sales for the year-ago quarter. The decrease in gross profit and margin in the electronic and metallic segment was mainly attributed to increases in labor cost as well as in factory overheads, offsetting a decrease in raw materials cost as a percentage of net sales.

The Company reported net income of $0.04 million for the first quarter ended June 30, 2012 compared to net income of $0.08 million for the quarter ended June 30, 2011. Deswell reported a basic and diluted income per share of $0.0025 for the first quarter of fiscal 2013, (based on 16,203,000 and 16,207,000 weighted average shares outstanding, respectively) compared to a basic and diluted income per share of $0.0046, (based on 16,197,000 and 16,204,000 weighted average shares outstanding, respectively) for the same quarter ended June 30, 2011.

The Company's financial position remained strong at the end of the first quarter of fiscal year 2013, with $33.5 million in cash and cash equivalents at June 30, 2012, compared to $33.1 million at June 30, 2011. Working capital totaled $60.0 million as of June 30, 2012, versus $60.9 million as of June 30, 2011. Furthermore, the Company has no long-term or short-term borrowings at June 30, 2012.

Mr. Franki Tse, Chief Executive Officer, commented, “We still face the softening demand which reduced our sales significantly in this quarter. Although the global economic situation is still one of our major business concerns, we have been taking many steps to secure our sales: developing new market segments, broadening product ranges and diversifying into new business areas. We believe we will be able to capitalize on some opportunities currently under development to drive improved revenue during the coming quarters. As our balance sheet remains particularly strong with cash and no long or short term debt, we anticipate dividends to be declared in each of the coming three quarters will be at least $0.05 per share.”

First Quarter Dividends

The Company also announced that on August 15, 2012 its board of directors declared a cash dividend of $0.05 per share for the fiscal first quarter ended June 30, 2012. The dividends will be payable on September 11, 2012 to shareholders of record as of August 27, 2012.

About Deswell

Deswell manufactures injection-molded plastic parts and components, electronic products and subassemblies, and metallic products for original equipment manufacturers (“OEMs”) and contract manufacturers at its factories in the People’s Republic of China. The Company produces a wide variety of plastic parts and components used in the manufacture of consumer and industrial products; printed circuit board assemblies using surface mount (“SMT”) and finished products such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and computer peripherals. The Company’s customers include Vtech Telecommunications Ltd. and Digidesign Inc.

To learn more about Deswell Industries, Inc., please visit the Company’s website at www.deswell.com.

Forward-Looking Statements

Statements in this press release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. For example, our statements regarding our expected growth in sales from the electronic and metallic division in the coming year and our efforts to reduce overhead costs in our plastic division are forward-looking statements. Actual results could differ materially because of the following factors, among others, which may cause revenues and income to fall short of anticipated levels or our overhead expenses to increase: our dependence on a few major customers; vigorous competition forcing product price reductions or discounts; the timing and amount of significant orders from our relatively few significant customers; continuing increases in resin prices that cannot be passed on to customers; unexpected production delays; obsolete inventory or product returns; losses resulting from fraudulent activity of our customers or employees; labor shortages that increase labor and costs; changes in the mix of product products we manufacture and sell; adverse currency fluctuations in the renminbi and Hong Kong dollar when translated to US dollars; potential new accounting pronouncements; and the effects of travel restrictions and quarantines associated with major health problems, such as the Severe Acute Respiratory Syndrome, on general economic activity.

For further information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” section of Company’s Annual Report on Form 20-F, copies of which may be obtained from the Website maintained by the Securities and Exchange Commission at http://www.sec.gov.

All information in this release is made as of the date of this press release. Deswell undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Deswell’s expectations.
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
( U.S. dollars in thousands)
 
  June 30, 2012   March 31,2012
ASSETS (Unaudited) (Audited)
Current assets :
Cash and cash equivalents $ 33,549 $ 33,073
Fixed deposits maturing over three months 2,512 4,008
Marketable securities 2,043 -
Available-for-sale securities 7,581 7,630
Accounts receivable, net 12,286 12,476
Inventories 15,871 15,852
Prepaid expenses and other current assets   2,038   2,164
Total current assets 75,880 75,203
Property, plant and equipment - net 45,103 46,177
Deferred income tax assets 187 187
Goodwill   392   392
Total assets $ 121,562 $ 121,959
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,616 $ 5,741
Accrued payroll and employee benefits 3,578 3,778
Customer deposits 1,557 2,257
Other accrued liabilities 1,622 1,311
Income taxes payable 496 438
Deferred income tax liabilities 445 421
Dividend payable   2,520   324
Total current liabilities   15,834   14,270
Shareholders' equity

Common shares nil par value - authorized 30,000,000 shares, shares issued and outstanding June 30, 2012 - 16,481,810; March 31, 2012 - 16,196,810
51,582 50,816
Additional paid-in capital 8,067 8,265
Accumulated other comprehensive income 4,521 4,570
Retained earnings   41,558   44,038
Total shareholders' equity   105,728   107,689
Total liabilities and shareholders' equity $ 121,562 $ 121,959
 
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS &
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
( U.S. dollars in thousands, except per share data )
 
  Quarter ended   Quarter ended
June 30, June 30,

2012

2011
 
Net sales $ 14,488 $ 18,324
Cost of sales   12,250     15,163  
Gross profit 2,238 3,161
Selling, general and administrative expenses 2,579 3,095
Other income, net   22     48  
Operating income (loss) (319 ) 114
Non-operating income (expense), net   443     (11 )
Income before income taxes 124 103
Income taxes   84     28  
Net income attributable to Deswell Industries, Inc. $ 40 $ 75

 

 

Other comprehensive loss
Unrealized loss on available-for-sale securities $ (49 ) $ (228 )
Comprehensive loss attributable to Deswell Industries, Inc. $ (9 ) $ (153 )

 

Net income per share attributable to Deswell Industries, Inc.
Basic:
Net income per share $ 0.0025   $ 0.0046  

Weighted average common shares outstanding shares in thousands)
  16,203     16,197  
Diluted:
Net income per share $ 0.0025   $ 0.0046  

Weighted average number of shares outstanding (in thousands)
  16,207     16,204  

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