Deswell Industries, Inc. Announces Second Quarter Results.28.7% Increase in Net Income in Second Quarter Company also Announces Second Quarter Dividend of $0.17 Per Share MACAU -- Deswell Industries, Inc. (Nasdaq: DSWL) today announced its financial results for the fiscal second quarter and six months ended September 30, 2006. Deswell reported net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the second quarter ended September 30, 2006 of $35.7 million, compared to $29.0 million for the same quarter of 2005, an increase of 23.0%. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. totaled $4.0 million, compared to $2.8 million for the same quarter of 2005, an increase of 43.6%. Net income for the quarter increased 28.7% to $3.6 million compared to $2.8 million for the year-ago quarter. Basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per share for the quarter increased to $0.24 and $0.24, respectively (based on 14,938,000 and 15,005,000 weighted average shares outstanding, respectively), compared to $0.19 and $0.19, respectively (based on 14,920,000 and 14,967,000 weighted average shares outstanding, respectively), for the quarter ended September 30, 2005. Net sales for the six months ended September 30, 2006 were $67.4 million, an increase of 14.0%, compared to sales of $59.1 million for the corresponding period in 2005. Operating income increased 14.8% to $7.8 million, compared to $6.8 million in the first six months of fiscal 2006, and net income increased 17.7% to $7.0 million, compared to $5.9 million in the first six months of fiscal 2006. Basic and diluted net income per share for the six months increased to $0.47 and $0.47, respectively (based on 14,931,000 and 14,959,000 weighted average shares outstanding, respectively), compared to $0.40 and $0.40, respectively (based on 14,893,000 and 14,921,000 weighted average shares outstanding, respectively), for the six months ended September 30, 2005. The Company's balance sheet remains strong, with cash and cash equivalents on September 30, 2006 totaling $15.2 million, compared to $25.4 million on March 31, 2006. Working capital totaled $56.9 million as of September 30, 2006, versus $55.1 million as of March 31, 2006. The Company has no long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. or short-term borrowings. Mr. Richard Lau, chief executive officer, commented, "This quarter's revenue growth was mainly driven by the 52.1% growth in our plastic division. We saw a significant pick up in business from one of our telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. customers, as well as an increase in business from some of our newer customers. We were disappointed with the 4.6% growth in our electronic & metallic division due to some customers delaying orders as well as a continued shortage of certain electronic materials. However, we are pleased that our customers have indicated to us that we will receive the delayed orders in the next three to six months." Mr. Lau continued, "Given the strong performance at our plastic's division during the quarter, we are filling capacity and very satisfied with the performance of our new state-of-the-art facility. We are confident about growth prospects in the coming two quarters as orders from new customers develop and as we see the delayed customer orders at our electronics division." Second-Quarter Dividends The Company also announced that on November 17, 2006 its board of directors declared a dividend of $0.17 per share for the second quarter. The dividend will be payable on December 18, 2006 to shareholders of record as of November 30, 2006. 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 People's Republic n. A political organization founded and controlled by a national Communist party. 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 (1) (Surface Mount Technology) See surface mount. (2) (Station ManagemenT) An FDDI network management protocol that provides direct management. Only one node requires the software. SMT - Station Management ") and finished products such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and computer peripherals. The Company's customers include Digidesign Inc., Vtech Telecommunications Ltd., Epson Precision (H.K.) Ltd., Inter-Tel Incorporated, Line 6 Manufacturing and Peavey Electronics Peavey Electronics Corporation is one of the largest audio equipment manufacturers in the world, headquartered in Meridian, Mississippi in the United States. History Hartley Peavey founded Peavey Electronics in 1965 after building his first amplifier in 1957. Corporation. To learn more about Deswell Industries, Inc., please visit the Company's web site at www.deswell.com. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 overhead costs see fixed 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 resin, any of a class of amorphous solids or semisolids. Resins are found in nature and are chiefly of vegetable origin. They are typically light yellow to dark brown in color; tasteless; odorless or faintly aromatic; translucent or transparent; brittle, fracturing prices that cannot be passed on to customers; unexpected production delays; obsolete inventory Obsolete Inventory Term that refers to inventory that is at the end of its product life cycle and has not seen any sales or usage for a set period of time usually determined by the industry. This type of inventory has to be written down and can cause large losses for a company. or product returns; losses resulting from fraudulent The description of a willful act commenced with the Specific Intent to deceive or cheat, in order to cause some financial detriment to another and to engender personal financial gain. activity of our customers or employees; labor shortages A Labor shortage is an economic condition in which there are insufficient qualified candidates (employees) to fill the market-place demands for employment at any price. This condition is sometimes referred to by Economists as "an insufficiency in the labor force. 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 Noun 1. Hong Kong dollar - the basic unit of money in Hong Kong dollar - the basic monetary unit in many countries; equal to 100 cents 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 Severe Acute Respiratory Syndrome (SARS) Definition Severe acute respiratory syndrome (SARS) is the first emergent and highly transmissible viral disease to appear during the twenty-first century. , 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. [TABLE OMITTED] [TABLE OMITTED] |
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