Deswell Announces Third Quarter 2013 Results

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Deswell Announces Third Quarter 2013 Results

-Company Announces Third Quarter Cash Dividend of $0.05 Per Share -

MACAO--(BUSINESS WIRE)-- Deswell Industries, Inc. (NAS: DSWL) today announced its financial results for the fiscal third quarter ended December 31, 2012.


Net sales for the third quarter ended December 31, 2012 were $13.8 million, a decrease of 15.2% compared to net sales of $16.2 million for the same quarter ended December 31, 2011. Net sales decreased by 12.7% to $6.4 million in the Company's plastic segment and decreased by 17.3% to $7.4 million in the electronic and metallic segment. The operating loss in the third quarter was $0.7 million, compared to an operating loss of $0.4 million for the same quarter of fiscal 2012.

Total gross margin decreased to 11.7% in the third quarter ended December 31, 2012 compared to 14.6% in the same quarter last year. Gross profit margin in the plastic segment decreased to 10.9% of net sales for the third quarter of fiscal 2013 compared to 19.1% 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 an increase in raw materials and labor costs as a percentage of net sales. Gross profit margin in the electronic and metallic segment improved to 12.5% of net sales for the third quarter ended December 31, 2012 compared to 10.9% of net sales for the year-ago quarter. The improvement in gross profit margin in the electronic and metallic segment was mainly attributed to efficient usage of raw materials and factory overheads.

The Company reported a net loss of $0.2 million for the third quarter ended December 31, 2012 compared to net income of $0.09 million for the quarter ended December 31, 2011. Deswell reported a basic and diluted loss per share of ($0.013) for the third quarter of fiscal 2013, (based on 16,698,000 and 16,717,000 weighted average shares outstanding, respectively) compared to a basic and diluted income per share of $0.006, (based on 16,197,000 and 16,198,000 weighted average shares outstanding, respectively) for the same quarter ended December 31, 2011.

Net sales for the nine months ended December 31, 2012 were $44.6 million, a decrease of 15.3%, compared to sales of $52.6 million for the corresponding period in fiscal 2012. Operating loss for the nine months ended December 31, 2012 was $1.0 million, compared to an operating loss of $0.5 million for the first nine months of fiscal 2012. The Company reported net income of $0.008 million in the first nine months of fiscal 2013, compared to a net loss of $0.7 million for the nine months ended December 31, 2011. Deswell reported basic and diluted net income per share of $0.0005 for the first nine months of fiscal 2013, (based on 16,482,000 and 16,559,000 weighted average share outstanding, respectively), compared to a basic and diluted loss per share of ($0.05), (based on 16,197,000 and 16,202,000 weighted average shares outstanding, respectively), for the prior corresponding period.

The Company's financial position remained strong at the end of the third quarter of fiscal year 2013, with $28.4 million in cash and cash equivalents at December 31, 2012, compared to $33.1 million at March 31, 2012. Working capital totaled $60.6 million as of December 31, 2012, versus $60.9 million as of March 31, 2012. Furthermore, the Company has no long-term or short-term borrowings as of December 31, 2012.

Mr. Franki Tse, Chief Executive Officer, commented, "Weakening demand in our export markets impacted sales and margins. We also continue to see increasing Chinese manufacturing costs and a shortage of available labor. In spite of these headwinds, we are focused on closely partnering with our customers, suggesting new product concepts and providing sophisticated design and development services. Our machinery and equipment is state of the art, and we continue to upgrade it while proactively managing our expenses. We are also aggressively seeking new customers. As the U.S. and European economies improve, we believe our efforts will result in improved performance for our shareholders. Meanwhile, our balance sheet is strong with cash and no debt. Cash from operations for the nine months ended December 31 totaled $6.2 million, and we continue to return capital to shareholders through dividends."

Third Quarter Dividends

The Company also announced that on February 5, 2013 its board of directors declared a cash dividend of $0.05 per share for the fiscal third quarter ended December 31, 2012. The dividends will be payable on March 7, 2013 to shareholders of record as of February 15, 2013.

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)

December 31,March 31,

2012

2012

ASSETS(Unaudited)(Audited)
Current assets :
Cash and cash equivalents$28,464$33,073
Fixed deposits maturing over three months6,8694,008
Marketable securities (note 2)3,498-
Available-for-sale securities (note 2)8,5757,630
Accounts receivable, net10,88812,476
Inventories (note 4)12,77015,852
Prepaid expenses and other current assets 1,132 2,164
Total current assets72,19675,203
Property, plant and equipment - net43,54246,177
Deferred income tax assets189187
Goodwill 392 392
Total assets$116,319$121,959
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable$4,364$5,741
Accrued payroll and employee benefits3,4423,778
Customer deposits1,2972,257
Other accrued liabilities1,3681,311
Income taxes payable572438
Deferred income tax liabilities519421
Dividend payable - 324
Total current liabilities 11,562 14,270
Shareholders' equity

Common shares nil par value - authorized 30,000,000 shares, shares issued and outstanding December 31, 2012 - 16,433,118 (note 6); March 31, 2012 - 16,196,810

52,44350,816
Additional paid-in capital6,9498,265
Accumulated other comprehensive income5,5154,570
Retained earnings 39,850 44,038
Total shareholders' equity 104,757 107,689
Total liabilities and shareholders' equity$116,319$121,959
 
 
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS &
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(U.S. dollars in thousands, except per share data)

    
 
Quarter endedNine months ended
December 31,December 31,

2012

2011

2012

2011

 
Net sales$13,766$16,241$44,557$52,585
Cost of sales 12,150  13,874  38,078  44,529 
Gross profit1,6162,3676,4798,056
Selling, general and administrative expenses2,4032,7987,7499,038
Other income, net 130  25  219  465 
Operating loss(657)(406)(1,051)(517)
Non-operating income, net 496  589  1,284  208 
Income (Loss) before income taxes(161)183233(309)
Income taxes 60  92  225  439 
Net income (loss) attributable to Deswell Industries, Inc.$(221)$91$8$(748)
 
Other comprehensive loss
Unrealized gain (loss) on available-for-sale securities$381 $(1,005)$945 $(1,525)
Comprehensive income (loss) attributable to Deswell Industries, Inc.$160 $(914)$953 $(2,273)
 
 
Net income (loss) per share attributable to
Deswell Industries, Inc. (note 5)
Basic:
Net income (loss) per share$(0.013)$0.006 $0.0005 $(0.05)

Weighted average common shares outstanding shares in thousands)

 16,698  16,197  16,482  16,197 
 
Diluted:
Net income (loss) per share$(0.013)$0.006 $0.0005 $(0.05)

Weighted average number of shares outstanding (in thousands)

 16,717  16,198  16,559  16,202 



Investor Relations:
Institutional Marketing Services (IMS)
John Nesbett/Jennifer Belodeau
203-972-9200

KEYWORDS:   United States  Macau  Asia Pacific  North America  China  New York

INDUSTRY KEYWORDS:

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