Company Announces First Half Cash Dividend
of $0.06 Per Share
Deswell Industries, Inc. (Nasdaq:DSWL) today announced its
unaudited financial results for the first six months of fiscal
2019, ended September 30, 2018.
Net sales for the six months ended September 30, 2018 were $34.8
million, an increase of 16.9% compared to net sales of $29.8
million for the six months ended September 30, 2017. Net sales
decreased by 1% to $13.6 million in the plastic segment and
increased by 32.4% to $21.2 million in the Company’s electronic
segment.
Total gross margin decreased to 13.8% of net sales during the
six months ended September 30, 2018, as compared to 19.6% of net
sales in the same period last year. Gross profit margin in the
plastic segment decreased to 16.4% of net sales for the first half
of fiscal 2019, compared to 24.3% of net sales for the
corresponding period of last fiscal year. The decrease in gross
profit and margin in the plastic segment was mainly due to
increases in raw materials cost, offsetting a slight decrease in
labor costs and subcontracting charges, as a percentage of sales.
Gross profit margin in the electronic segment decreased to 12.1% of
net sales for the first half of fiscal 2019, compared to 15.5% of
net sales for the corresponding period of last fiscal year. The
decrease in gross margin in the electronic segment was mainly
attributable to an increase in raw materials costs, as a percentage
of net sales. Operating income in the first half of fiscal
2019 was $0.2 million, compared to operating income of $1.6 million
for the same period of fiscal 2018.
The Company reported net income of $2.8 million for the six
months ended September 30, 2018, compared to net income of $3.7
million for the six months ended September 30, 2017. This was
primarily due to a decrease in gross profit, as a percentage of
sales, for the six months ended September 30, 2018. Deswell
reported basic and diluted income per share of $0.17 for the first
half of fiscal 2019 (based on 15,885,000 and 15,975,000 weighted
average shares outstanding, respectively), compared to basic and
diluted income per share of $0.23 (based on 15,885,000 weighted
average shares outstanding), for the six months ended September 30,
2017.
The Company's financial position remained strong, with $15.5
million in cash and cash equivalents and working capital totaled
$53.4 million as of September 30, 2018. Furthermore, the Company
has no long-term or short-term borrowings as of September 30,
2018.
Mr. Edward So, Chief Executive Officer, commented, “We saw solid
double-digit growth in our consolidated revenue driven by a 32%
improvement in our electronic segment. This revenue increase was
primarily attributable to increased orders from new and existing
customers for professional audio equipment and home entertainment
products. Gross margin in both our plastics and electronics
business was lower during the period due to higher raw material
costs. Throughout the first half of the fiscal year, the entire
electronics industry faced shortages of semiconductors and other
electronic components. While this impacted our margins, we were
able to proactively manage the situation with our customers and
effectively service their needs. Our balance sheet remains strong,
and we continue to focus on expanding our business with both new
and existing customers. On the other hand, in order to mitigate the
uncertainties caused by the trade war between the US and China, we
are studying the feasibility of reallocating part of the production
to Southeast Asian countries.”
First Half Dividend
The Company also announces that its board of directors today
declared a cash dividend of $0.06 per share for the first half of
the fiscal year ended September 30, 2018. The dividend will be
payable on December 18, 2018 to shareholders of record as of
November 27, 2018.
About Deswell
Deswell manufactures injection-molded plastic parts and
components, electronic products and subassemblies, and metallic
molds and accessory parts 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.
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 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,
2018
2017
ASSETS (Unaudited) (Audited) Current assets : Cash and cash
equivalents $ 15,482 $ 15,192 Fixed deposits maturing over three
months 500 2,190 Time deposits maturing over twelve months –
current portion 2,923 3,129 Marketable securities 18,937 17,282
Accounts receivable, net 19,288 15,912 Inventories 12,970 12,933
Prepaid expenses and other current assets 1,951 2,267
Total current assets 72,051 68,905 Property, plant and equipment -
net 30,612 31,494 Total assets $ 102,663 $ 100,399
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities Accounts payable $ 9,189 $ 8,596 Accrued payroll and
employee benefits 5,566 5,566 Customer deposits 1,370 1,707 Other
accrued liabilities 1,915 1,873 Income taxes payable 626
603 Total current liabilities 18,666 18,345
Deferred income tax liabilities 596 775 Total
liabilities 19,262 19,120 Shareholders' equity
Common shares nil par value - authorized 30,000,000 shares;
15,885,239 shares issued and outstanding as of September 30, 2018
and March 31, 2018 53,063 53,063 Additional paid-in capital 5,184
5,184 Accumulated other comprehensive income 5,316 5,316 Retained
earnings 19,838 17,716 Total shareholders' equity
83,401 81,279 Total liabilities and shareholders'
equity $ 102,663 $ 100,399
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
& COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(U.S. dollars in thousands, except per
share data)
Six months ended September 30,
2018
2017
Net sales $ 34,795 $ 29,759 Cost of sales 30,005
23,938 Gross profit 4,790 5,821 Selling, general and
administrative expenses 4,763 4,434 Other income (expense), net
223 198 Operating income (loss) 250 1,585
Non-operating income, net 2,482 2,130 Income before
income taxes 2,732 3,715 Income taxes (25 ) 46 Net
income attributable to Deswell Industries, Inc. $ 2,757 $ 3,669
Other comprehensive income (loss) $ - $ - Comprehensive
income (loss) attributable to Deswell Industries, Inc. $ 2,757 $
3,669 Net income per share attributable to Deswell
Industries, Inc. Basic: Net income per share $ 0.17 $ 0.23 Weighted
average common shares outstanding shares (in thousands)
15,885 15,885 Diluted: Net income per share $ 0.17 $
0.23 Weighted average number of shares outstanding (in thousands)
15,975 15,885
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(U.S. dollars in thousands)
Six months ended Six months ended September 30,
September 30,
2018
2017
Cash flows from operating activities : Net income $ 2,757 $ 3,669
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 1,099 1,054
(Reversal of) provision for doubtful accounts 58 (84 ) Allowances
for obsolete inventories 69 85 (Gain) Loss on disposal of property,
plant and equipment (1 ) 17 Unrealized holding gain on marketable
securities (1,109 ) (537 ) Realized gain on disposal of marketable
securities (396 ) (340 ) Scrip dividend received - (139 ) Deferred
tax (179 ) 3 Changes in operating assets and liabilities : Accounts
receivable (3,434 ) (1,780 ) Inventories (106 ) (2,608 ) Prepaid
expenses and other current assets 316 443 Accounts payable 593
1,843 Accrued payroll and employee benefits - 765 Customer deposits
(337 ) (50 ) Other accrued liabilities 42 (257 ) Income taxes
payable 23 54 Net cash provided by (used in)
operating activities (605 ) 2,138 Cash flows
from investing activities Purchase of property, plant and equipment
(229 ) (577 ) Proceeds from disposal of property, plant and
equipment 13 6 Purchase of marketable securities (5,004 ) (435 )
Proceeds from disposal of marketable securities 4,854 1,928
Increase in fixed deposits maturing over three months 1,690 3,306
(Increase in) decrease in fixed deposits maturing over twelve
months 206 (1,619 ) Net cash provided by investing
activities 1,530 2,609 Cash flows from
financing activities Dividend paid (635 ) (1,112 )
Net cash used in financing activities (635 ) (1,112 )
Cash effect of exchange rate changes - -
Net increase (decrease) in cash and cash equivalents 290
3,635 Cash and cash equivalents, at beginning of period
15,192 8,078 Cash and cash equivalents, at end of period
15,482 11,713 Supplementary disclosures of
cashflow information: Cash paid during the period for: Interest - -
Income taxes - 8
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Investor Relations:John Nesbett/Jennifer BelodeauIMS
Investor Relations203-972-9200
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