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
Deswell Announces Second Quarter 2014 Results
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