Deswell Announces Third Quarter 2013 Results

  Deswell Announces Third Quarter 2013 Results

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

Business Wire

MACAO -- February 5, 2013

Deswell Industries, Inc. (Nasdaq: 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,        52,443       50,816
2012 - 16,433,118 (note 6); March 31, 2012 -
16,196,810
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           2,403        2,798        7,749        9,038
administrative expenses
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           (161   )     183          233          (309   )
income taxes
Income taxes                  60         92         225        439    
Net income (loss)
attributable to Deswell      $ (221   )   $ 91         $ 8          $ (748   )
Industries, Inc.
                                                                    
Other comprehensive loss
Unrealized gain (loss) on
available-for-sale           $ 381       $ (1,005 )   $ 945       $ (1,525 )
securities
Comprehensive income
(loss) attributable to       $ 160       $ (914   )   $ 953       $ (2,273 )
Deswell Industries, Inc.
                                                                    
                                                                    
Net income (loss) per
share attributable to
Deswell Industries, Inc.
(note 5)
Basic:
Net income (loss) per        $ (0.013 )   $ 0.006     $ 0.0005    $ (0.05  )
share
Weighted average common
shares outstanding shares     16,698     16,197     16,482     16,197 
in thousands)
                                                                    
Diluted:
Net income (loss) per        $ (0.013 )   $ 0.006     $ 0.0005    $ (0.05  )
share
Weighted average number of
shares outstanding (in        16,717     16,198     16,559     16,202 
thousands)

Contact:

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