Deswell Announces Second Quarter 2014 Results

  Deswell Announces Second Quarter 2014 Results

      Company Announces Second Quarter Cash Dividend of $0.05 Per Share

Business Wire

MACAO -- November 13, 2013

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.

Net sales for the six months ended September 30, 2013 were $23.0 million, a
decrease of 25.3%, compared to sales of $30.8 million for the corresponding
period in fiscal 2013. Operating loss for the six months ended September 30,
2013 was $2.9 million, compared to operating loss of $0.4 million for the
first six months of fiscal 2013. The Company reported a net loss of $2.9
million in the first half of fiscal 2013, compared to net income of $0.2
million for the six months ended September 30, 2012. Deswell reported basic
and diluted net loss per share of ($0.181) for the first six months of fiscal
2013, (based on 16,247,000 and 16,271,000 weighted average share outstanding,
respectively), compared to basic and diluted income per share of $0.014 (based
on 16,596,000 and 16,654,000 weighted average shares outstanding,
respectively), for the prior corresponding period.

The Company's financial position remained strong at the end of the second
quarter of fiscal year 2014, with $24.6 million in cash and cash equivalents
at September 30, 2013 compared to $26.7 million at September 30, 2012. Working
capital totaled $54.6 million as of September 30, 2013, versus $61.1 million
as of September 30, 2012. Furthermore, the Company has no long-term or
short-term borrowings as of September 30, 2013.

Mr. Franki Tse, Chief Executive Officer, commented, “This was another
challenging quarter for our business and our results continue to be impacted
by weak export sales, higher labor wages and RMB appreciation. We remain
focused on controlling costs while also taking the initiative to sell out of
date or unused equipment, restructure our factory operations and bolster our
R&D and marketing organizations so that we may provide improved products to
our existing customers and attract new customers. Our balance sheet is strong
with approximately $25 million in cash and no short or long term debt.”

Second Quarter Dividends

The Company also announced that on November 13, 2013 its board of directors
declared a cash dividend of $0.05 per share for the fiscal second quarter
ended September 30, 2013. The dividends will be payable on December 18, 2013
to shareholders of record as of November 25, 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)
                                                  September 30,  March 31,
                                                   2013            2013
ASSETS                                             (Unaudited)     (Audited)
Current assets :
Cash and cash equivalents                          $  24,576      $ 32,030  
Fixed deposits maturing over three months             12,076         8,684
Marketable securities                                 5,726          6,168
Available-for-sale securities                         1,478          1,586
Accounts receivable, net                              11,009         8,291
Inventories                                           12,486         11,376
Prepaid expenses and other current assets            1,085        1,152   
Total current assets                                  68,436         69,287
Property, plant and equipment - net                   40,969         42,694
Deferred income tax assets                            196            192
Goodwill                                             392          392     
Total assets                                       $  109,993     $ 112,565 
                                                                   
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                   
Current liabilities
Accounts payable                                   $  5,205        $ 3,144
Accrued payroll and employee benefits                 4,685          4,133
Customer deposits                                     1,166          1,254
Other accrued liabilities                             1,390          1,260
Income taxes payable                                  655            592
Deferred income tax liabilities                      688          606     
Total current liabilities                            13,789       10,989  
                                                                   
Shareholders' equity
Common shares nil par value - authorized
30,000,000 shares, shares issued and outstanding      53,063         52,443
September 30, 2013 - 16,296,211; March 31, 2013
- 16,387,648
Additional paid-in capital                            5,885          6,831
Accumulated other comprehensive income                5,180          5,288
Retained earnings                                    32,076       37,014  
Total shareholders' equity                           96,204       101,576 
Total liabilities and shareholders' equity         $  109,993     $ 112,565 


DESWELL INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS &
COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
( U.S. dollars in thousands, except per share data )

                            Quarter ended            Six months ended
                             September 30,             September 30,
                             2013        2012         2013        2012
                                                                    
Net sales                    $ 11,869     $ 16,303     $ 22,989     $ 30,791
Cost of sales                 10,824     13,678     21,171     25,928 
Gross profit                   1,045        2,625        1,818        4,863
Selling, general and           2,900        2,767        5,479        5,346
administrative expenses
Other income, net             336        67         750        89     
Operating loss                 (1,519 )     (75    )     (2,911 )     (394   )
Non-operating income, net     367        345        117        788    
Income (loss) before           (1,152 )     270          (2,794 )     394
income taxes
Income taxes                  76         81         154        165    
Net income (loss)
attributable to Deswell      $ (1,228 )   $ 189        $ (2,948 )   $ 229
Industries, Inc.
                                                                    
Other comprehensive income
(loss)
Unrealized gain (loss) on
available-for-sale           $ 4         $ 613       $ (108   )   $ 564    
securities
Comprehensive income
(loss) attributable to       $ (1,224 )   $ 802       $ (3,056 )   $ 793    
Deswell Industries, Inc.
                                                                    
Net income (loss) per
share attributable to
Deswell Industries, Inc.
Basic:
Net income (loss) per        $ (0.076 )   $ 0.011     $ (0.181 )   $ 0.014  
share
Weighted average common
shares outstanding shares     16,201     16,726     16,247     16,596 
(in thousands)
                                                                    
Diluted:
Net income (loss) per        $ (0.076 )    0.011     $ (0.181 )   $ 0.014  
share
Weighted average number of
shares outstanding (in        16,206     16,749     16,271     16,654 
thousands)

Contact:

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