Deswell Announces Third Quarter 2013 Results

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 months

6,869

4,008

Marketable securities (note 2)

3,498

-

Available-for-sale securities (note 2)

8,575

7,630

Accounts receivable, net

10,888

12,476

Inventories (note 4)

12,770

15,852

Prepaid expenses and other current assets

1,132

2,164

Total current assets

72,196

75,203

Property, plant and equipment - net

43,542

46,177

Deferred income tax assets

189

187

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 benefits

3,442

3,778

Customer deposits

1,297

2,257

Other accrued liabilities

1,368

1,311

Income taxes payable

572

438

Deferred income tax liabilities

519

421

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

52,443

50,816

Additional paid-in capital

6,949

8,265

Accumulated other comprehensive income

5,515

4,570

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 ended

Nine 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 profit

1,616

2,367

6,479

8,056

Selling, general and administrative expenses

2,403

2,798

7,749

9,038

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

)

183

233

(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



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

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