Deswell Announces First Quarter 2014 Results

  Deswell Announces First Quarter 2014 Results

 Company Announces First Quarter Cash Dividend of $0.05 Per Share And Special
                       Cash Dividend of $0.02 Per Share

Business Wire

MACAO -- August 30, 2013

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

Net sales for the first quarter ended June 30, 2013 were $11.1 million, a
decrease of 23.2% compared to net sales of $14.5 million for the same quarter
ended June 30, 2012. Net sales decreased by 18.2% to $5.8 million in the
Company’s plastic segment and decreased by 28.1% to $5.3 million in the
electronic and metallic segment. The operating loss in the first quarter was
$1.4 million, compared to an operating loss of $0.3 million for the same
quarter of fiscal 2013.

Total gross margin decreased to 7.0% in the first quarter ended June 30, 2013
compared to 15.4% in the same quarter last year. Gross profit margin in the
plastic segment decreased to 8.7% of net sales for the first quarter of fiscal
2014 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 increases in labor cost resulting from a raise in minimum wage rate, and in
factory overheads as a percentage of sales. Gross profit margin in the
electronic and metallic segment decreased to 5.0% of net sales for the first
quarter ended June 30, 2013 compared to 12.0% 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 raw materials and labor
costs as a percentage of sales, resulting from a higher labor rate.

The Company reported a net loss of $1.7 million for the first quarter ended
June 30, 2013 compared to a net income of $0.04 million for the quarter ended
June 30, 2012. Deswell reported a basic and diluted loss per share of ($0.11)
for the first quarter of fiscal 2014, (based on 16,289,000 and 16,289,000
weighted average shares outstanding, respectively) compared to a basic and
diluted income per share of $0.0025, (based on 16,203,000 and 16,207,000
weighted average shares outstanding, respectively) for the quarter ended June
30, 2012.

The Company's financial position remained strong at the end of the first
quarter of fiscal year 2014, with $29.5 million in cash and cash equivalents
at June 30, 2013, compared to $32.0 million at June 30, 2012. Working capital
totaled $56.2 million as of June 30, 2013, versus $58.2 million as of June 30,
2012. Furthermore, the Company has no long-term or short-term borrowings as of
June 30, 2013.

Mr. Franki Tse, Chief Executive Officer, commented, “We are still facing a
challenging environment which is reflected in our decreased sales in the
quarter. Given the increases in labor wages, RMB appreciation and weak export
sales, we believe the situation will remain difficultfor the near term, but
expect to see some slight improvement later this fiscal year.We willcontinue
to be cautious with our expenses,and plan to sell some out of date SMT and
idle injectionmachines, restructure our factory operations and keep
strengthening our R&D and marketing teams. We are working closely with
customers on both OEM and ODM projects, to explore more sales, business and
investment opportunities. Our balance sheet remains strong with no short-term
or long term debt..”

First Quarter Dividends

The Company also announced that on August 30, 2013 its board of directors
declared a cash dividend of $0.05 per share and a special cash dividend of
$0.02 for the fiscal first quarter ended June 30, 2013. The dividends will be
payable on September 30, 2013 to shareholders of record as of September 11,
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 Lenbrook
Industries, Ltd.

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,      March 31,
                                                     2013            2013
ASSETS                                               (Unaudited)     (Audited)
                                                                     
Current assets :
Cash and cash equivalents                            $  29,460       $ 32,030
Fixed deposits maturing over three months               9,878          8,684
Marketable securities                                   5,687          6,168
Available-for-sale securities                           1,474          1,586
Accounts receivable, net                                10,495         8,291
Inventories                                             11,727         11,376
Prepaid expenses and other current assets              1,319         1,152
Total current assets                                    70,040         69,287
Property, plant and equipment - net                     41,676         42,694
Deferred income tax assets                              195            192
Goodwill                                               392           392
Total assets                                         $  112,303      $ 112,565
                                                                     
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                     
Current liabilities
Accounts payable                                     $  4,771        $ 3,144
Accrued payroll and employee benefits                   4,337          4,133
Customer deposits                                       1,184          1,254
Other accrued liabilities                               1,396          1,260
Income taxes payable                                    629            592
Deferred income tax liabilities                         653            606
Dividend payable                                       838           -
Total current liabilities                              13,808        10,989
                                                                     
Shareholders' equity
Common shares nil par value - authorized
30,000,000 shares,

shares issued and outstanding June 30, 2013 -                        
16,228,308 (note 6);
                                                        52,457         52,443
March 31, 2013 - 16,387,648
Additional paid-in capital                              6,406          6,831
Accumulated other comprehensive income                  5,176          5,288
Retained earnings                                      34,456        37,014
Total shareholders' equity                             98,495        101,576
Total liabilities and shareholders' equity           $  112,303      $ 112,565

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,
                                               2013              2012
                                                                 
Net sales                                      $  11,120         $  14,488
Cost of sales                                    10,347          12,250  
Gross profit                                      773               2,238
Selling, general and administrative               2,579             2,579
expenses
Other income, net                                414             22      
Operating loss                                    (1,392  )         (319    )
Non-operating income (loss), net                 (250    )        443     
Income (Loss) before income taxes                 (1,642  )         124
Income taxes                                     78              84      
Net income (loss) attributable to Deswell      $  (1,720  )     $  40
Industries, Inc.
                                                                 
Other comprehensive loss
      Unrealized loss on                       $  (112    )      $  (49     )
      available-for-sale securities
Comprehensive loss attributable to Deswell     $  (1,832  )      $  (9      )
Industries, Inc.
                                                                 
                                                                 
Net income (loss) per share attributable
to
      Deswell Industries, Inc.
Basic:
      Net income (loss) per share              $  (0.11   )      $  0.0025  
      Weighted average common shares                                
      outstanding
      shares (in thousands)                      16,289          16,203  
                                                                 
Diluted:
      Net income (loss) per share              $  (0.11   )      $  0.0025  
      Weighted average number of shares
      outstanding (in thousands)                 16,289          16,207  

Contact:

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