Deswell Announces Second Quarter 2014 Results

Deswell Industries, Inc. (Nasdaq:DSWL) today announced its financial results for the fiscal second quarter ended September 30, 2013.

Net sales for the second quarter ended September 30, 2013 were $11.9 million, a decrease of 27.2% compared to net sales of $16.3 million for the same quarter ended September 30, 2012. Net sales decreased by 34.0% to $5.6 million in the Company’s plastic segment and decreased by 19.9% to $6.3 million in the electronic and metallic segment. The operating loss in the second quarter was $1.5 million, compared to an operating loss of $0.08 million for the same quarter of fiscal 2013.

Total gross margin decreased to 8.8% in the second quarter ended September 30, 2013 compared to 16.1% in the same quarter last year. Gross profit margin in the plastic segment decreased to 8.8% of net sales for the second quarter of fiscal 2014 compared to 19.3% of net sales for the same quarter of last fiscal year. The decrease in gross profit and margin in the plastic segment was mainly due to the combined effect of decrease in sales volume, plus relatively higher labor cost as a percentage of sales due to a raise in minimum wage rate offsetting the decrease in headcount. Gross profit margin in the electronic and metallic segment decreased to 8.8% of net sales for the second quarter ended September 30, 2013 compared to 12.7% 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 increase in labor costs, resulting from a higher labor rate, offsetting the decrease in headcount.

The Company reported a net loss of $1.2 million for the second quarter ended September 30, 2013 compared to net income of $0.2 million for the quarter ended September 30, 2012. Deswell reported a basic and diluted loss per share of ($0.076) for the second quarter of fiscal 2014 (based on 16,201,000 and 16,206,000 weighted average shares outstanding, respectively), compared to a basic and diluted income per share of $0.011 (based on 16,726,000 and 16,749,000 weighted average shares outstanding, respectively), for the quarter ended September 30, 2012.

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