Company Announces First Half Cash Dividend
of $0.08 Per Share
Deswell Industries, Inc. (Nasdaq:DSWL) today announced its
unaudited financial results for the first six months of fiscal
2020, ended September 30, 2019.
Net sales for the six months ended September 30, 2019 were $37.7
million, an increase of 8.4% compared to net sales of $34.8 million
for the six months ended September 30, 2018. Net sales increased by
7.7% to $14.7 million in the plastic segment and increased by 8.8%
to $23.0 million in the Company’s electronic segment.
Total gross margin increased to 17.4% of net sales during the
six months ended September 30, 2019, as compared to 13.8% of net
sales in the same period last year. Gross profit margin in the
plastic segment increased to 21.0% of net sales for the first half
of fiscal 2020, compared to 16.4% of net sales for the
corresponding period of last fiscal year. The increase in gross
profit and margin in the plastic segment was mainly due to
decreases in raw materials cost, labor costs and subcontracting
charges, offsetting an increase in factory overheads, as a
percentage of sales. Gross profit margin in the electronic segment
increased to 15.0% of net sales for the first half of fiscal 2020,
compared to 12.1% of net sales for the corresponding period of last
fiscal year. The increase in gross margin in the electronic segment
was mainly attributable to decreases in raw materials and labor
costs, as a percentage of net sales. Operating income in the first
half of fiscal 2020 was $1.2 million, compared to operating income
of $0.2 million for the same period of fiscal 2019.
The Company reported net income of $1.2 million for the six
months ended September 30, 2019, compared to net income of $2.8
million for the six months ended September 30, 2018. This was
primarily due to decrease in non-operating income, as a percentage
of sales, for the six months ended September 30, 2019. Deswell
reported basic and diluted income per share of $0.08 for the first
half of fiscal 2020 (based on 15,912,000 and 15,973,000 weighted
average shares outstanding, respectively), compared to basic and
diluted income per share of $0.17 (based on 15,885,000 and
15,975,000 weighted average shares outstanding), for the six months
ended September 30, 2018.
The Company's financial position remained strong, with $13.1
million in cash and cash equivalents and working capital totaled
$53.9 million as of September 30, 2019. Furthermore, the Company
has no long-term or short-term borrowings as of September 30,
2019.
Mr. Edward So, Chief Executive Officer, commented, “We are
pleased with the continued solid organic growth driven by expanding
relationships with both existing and new customers. This revenue
increase continues to be primarily attributable to increased orders
for professional audio equipment and home entertainment products.
Operationally, we have strengthened our ability to meet customer
needs by enhancing our product engineering resources and
capabilities with the expansion of our product development team and
the addition of engineers from a variety of disciplines.
Furthermore, we have implemented certain automated systems into our
manufacturing process, resulting in decreased costs in both
overhead and for quality control. Operating income for the first
half of 2020 increased significantly given the higher gross margins
in both the plastics and electronics sides of our business.
Additionally, our balance sheet remains very strong and is a key
competitive advantage as we grow the business. Finally, as we
mentioned in our 2H2019 press release, we have been evaluating our
options to mitigate uncertainties caused by the ongoing trade
controversy between the U.S. and China, including the reallocation
of a portion of our production to Southeast Asia. To that end, we
have submitted an application to incorporate as a foreign invested
enterprise (“FIE”) in Vietnam, while we plan the relocation of
certain products there.”
First Half Dividend
The Company also announces that its board of directors today
declared a cash dividend of $0.08 per share for the first half of
the fiscal year ended September 30, 2019. The dividend will be
payable on December 13, 2019 to shareholders of record as of
November 27, 2019.
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
CONSOLIDATED BALANCE SHEET
( U.S. dollars in thousands)
Sept. 30
March 31,
2019
2019
ASSETS
(Unaudited)
(Audited)
Current assets :
Cash and cash equivalents
$
13,123
$
14,371
Fixed deposits maturing over three months
1,842
371
Time deposits maturing over twelve months - current portion
-
-
Marketable securities
22,857
24,446
Accounts receivable, net
21,568
15,734
Inventories
10,863
13,030
Prepaid expenses and other current assets
2,012
2,006
Total current assets
72,265
69,958
Property, plant and equipment - net
29,428
30,211
Time deposits maturing over twelve
months
1,417
-
Total assets
$
103,110
$
100,169
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
$
8,723
$
6,253
Accrued payroll and employee benefits
6,044
5,676
Customer deposits
1,081
1,298
Other accrued liabilities
1,762
1,662
Income taxes payable
706
657
Total current liabilities
18,316
15,546
Deferred income tax liabilities
631
659
Total liabilities
18,947
16,205
Shareholders' equity
Common shares nil par value; authorized 30,000,000 shares;
17,031,810 and 17,061,810 shares issued as of September 30, 2019
and March 31, 2019; 15,915,239 and 15,885,239
53,143
53,063
shares outstanding as of September 30, 2019 and March 31, 2019
Additional paid-in capital
5,168
5,184
Accumulated other comprehensive income
5,316
5,316
Retained earnings
20,536
20,401
Total shareholders' equity
84,163
83,964
Total liabilities and shareholders' equity
$
103,110
$
100,169
DESWELL INDUSTRIES,
INC.
CONSOLIDATED STATEMENT OF
OPERATIONS & COMPREHENSIVE INCOME
(UNAUDITED)
(U.S. dollars in thousands,
except per share data)
Six months ended
September 30,
2019
2018
Net sales
$
37,713
$
34,795
Cost of sales
31,169
30,005
Gross profit
6,544
4,790
Selling, general and administrative
expenses
5,208
4,763
Other income (expense), net
(180
)
223
Operating income
1, 156
250
Non-operating income, net
219
2,482
Income before income taxes
1,375
2,732
Income taxes
126
(25
)
Net income attributable to Deswell
Industries, Inc.
$
1,249
$
2,757
Other comprehensive income
$
-
$
-
Comprehensive income attributable to
Deswell Industries, Inc.
$
1,249
$
2,757
Net income per share attributable to
Deswell Industries, Inc. (note 5)
Basic:
Net income per share
$
0.08
$
0.17
Weighted average common shares outstanding shares (in thousands)
15,912
15,885
Diluted:
Net income per share
$
0.08
$
0.17
Weighted average number of shares outstanding (in thousands)
15,973
15,975
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
( U.S. dollars in thousands )
Six months ended
Six months ended
September 30,
September 30,
2019
2018
Cash flows from operating activities :
Net income
$
1,249
$
2,757
Adjustments to reconcile net income to net cash provided by
operating activities : Depreciation and amortization
1,014
1,099
Provision for doubtful accounts
202
58
Allowances for obsolete inventories
53
69
(Gain) Loss on disposal of property, plant and equipment
34
(1
)
Unrealized holding (gain) loss on marketable securities
1,252
(1,109
)
Realized (gain) on disposal of marketable securities
(29
)
(396
)
Scrip dividend received
10
-
Deferred tax
(28
)
(179
)
Changes in operating assets and liabilities : Accounts receivable
(6,036
)
(3,434
)
Inventories
2,114
(106
)
Prepaid expenses and other current assets
(6
)
316
Accounts payable
2,470
593
Accrued payroll and employee benefits
368
-
Customer deposits
(217
)
(337
)
Other accrued liabilities
100
42
Income taxes payable
49
23
Net cash (used in) provided by used in
operating activities
2,599
(605
)
Cash flows from investing activities
Purchase of property, plant and equipment
(270
)
(229
)
Proceeds from disposal of property, plant and equipment,
5
13
Purchase of marketable securities
(1,264
)
(5,004
)
Proceeds from disposal of marketable securities
1,620
4,854
Increase in fixed deposits maturing over three months
(1,471
)
1,690
Decrease in fixed deposits maturing over twelve months
(1,417
)
206
Net cash (used in ) provided by investing
activities
(2,797
)
1,530
Cash flows from financing activities
Dividends paid
(1,114
)
(635
)
Exercise of stock options
64
-
Net cash used in financing activities
(1,050
)
(635
)
Net increase (decrease) in cash and cash
equivalents
(1,248
)
290
Cash and cash equivalents, at beginning of
period
14,371
15,192
Cash and cash equivalents, at end of
period
13,123
15,482
Supplementary disclosures of cash flow
information :
Cash paid during the period for : Interest
-
-
Income taxes
57
-
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191115005012/en/
Investor Relations: John Nesbett/Jennifer Belodeau IMS
Investor Relations 203.972.920
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