Deswell Industries, Inc. Announces Second-Quarter Results; 27% Increase in Second Quarter Net Sales; Company also Announces Second Quarter Dividend of $0.24 Per Share.HONG KONG Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. -- Deswell Industries, Inc. (Nasdaq:DSWL) today announced its financial results for the second quarter ended September September: see month. 30, 2004. 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 quarter ended September 30, 2004 were $31.9 million, an increase of 27.3% compared to net sales of $25.1 million for the quarter ended September 30, 2003. 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. decreased 0.3% to $4.50 million, compared to $4.51 million for the same quarter in 2003. Net income for the quarter decreased 12.0% to $3.6 million compared to $4.1 million for the year-ago quarter. The basic earnings per share and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of decreased to $0.39 and $0.38, respectively (based on 9,189,000 and 9,432,000 weighted average shares outstanding, respectively), compared to $0.45 and $0.44, respectively (based on 9,103,000 and 9,375,000 weighted average shares outstanding, respectively), in the first quarter ended September 30, 2003. Net sales for the six months ended September 30, 2004 were $60.7 million, an increase of 18.7%, compared to sales of $51.2 million for the corresponding period in 2003. Operating income increased 1.7% to $9.3 million, compared to $9.2 million in the previous year, and net income decreased 10.1% to $7.6 million, compared to $8.5 million in the previous year. The basic earnings per share and diluted earnings per share decreased to $0.83 and $0.81, respectively (based on 9,169,000 and 9,448,000 weighted average shares outstanding, respectively), compared to $0.93 and $0.92, respectively (based on 9,084,000 and 9,205,000 weighted average shares outstanding, respectively), in the six months ended September 30, 2003. The Company's cash and cash equivalents for the quarter were $16.5 million, as compared to $30.2 million on March 31, 2004. The decreased in cash position was mainly attributed to the funding from cash flow for the construction and acquisition of machinery for the plastic-injection manufacturing plant in Dongguan and for the rapid growth of the electronic and metallic segment. Working capital was $50.3 million as of September 30, 2004, versus $52.9 million as of March 31, 2004. The Company has short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. borrowings of $0.9 million and 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. borrowings at September 30, 2004. Mr. Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a Lau, chairman and chief executive officer, commented, "During the quarter, our 27% sales increase was driven by 61% revenue growth at our electronic & metallic division due to our continued penetration The successful unauthorized breach of a security perimeter. See penetration test. of the audio equipment market. Unfortunately, raw material pricing impacted both of our business segments, particularly the plastics operation. Raw material pricing was up 70% to 100% compared to last year. With at least 60% of the sales price already fixed, we have not been able to pass through much of the increased raw material prices on existing contracts. In addition to this, both segments also faced increasing competitions in the marketplace which has led to pricing pressure on our products." Mr. Lau continued, "We expect growth at our plastic segment to pick up again in late fiscal 2005. An important new growth driver in this segment will be a new Export Tooling Division that will exclusively manufacture large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. molds. These molds will not be used for manufacturing plastic parts at our facility but rather these molds will be sent directly to customers. The machinery for this division will be fully installed by April 2005." Second-Quarter Dividends The Company also announced that on November November: see month. 12, 2004 its board of directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a dividend of $0.24 per share for the second quarter. The dividend will be payable on December December: see month. 7, 2004 to shareholders of record as of November 29, 2004. 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 Digidesign is an American digital audio technology company. It was founded in 1984 by Peter Gotcher and Evan Brooks. The company began as a project to raise money for the founders' band, selling EPROM chips for drum machines. Inc., Vtech Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. Ltd., Epson Precision (H.K.) Ltd., Inter-Tel Incorporated, Kyocera Kyocera Corporation (京セラ株式会社 Mita Industrial Co. (H.K.) Limited, 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 and Emerson. To learn more about Deswell Industries, Inc., please visit the Company's web site at www.deswell.com. This press release may contain 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. within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this press release are based on current expectations and are subject to change. Actual results may differ materially from the forward-looking statements. Deswell does not undertake to update any such forward-looking statements or to publicly announce developments or events relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the matters described herein. Uncertainties and risks are described in Deswell's most recently filed SEC documents, such as its most recent form 20-F.
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(U.S. dollars in thousands, except per share data)
Quarter ended Six months ended
September 30, September 30
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
(Unaudited) (Unaudited)
Net sales $31,924 $25,079 $60,712 $51,154
Cost of sales 23,463 17,099 43,933 34,763
-------- -------- -------- --------
Gross profit 8,461 7,980 16,779 16,391
Selling, general and
administrative expenses 3,962 3,469 7,468 7,234
-------- -------- -------- --------
Operating income 4,499 4,511 9,311 9,157
Interest expense (3) (15) (3) (15)
Other income, net 32 272 62 834
-------- -------- -------- --------
Income before income taxes 4,528 4,768 9,370 9,976
Income taxes 178 139 309 430
-------- -------- -------- --------
Income before minority interests 4,350 4,629 9,061 9,546
Minority interests 722 508 1,438 1,071
-------- -------- -------- --------
Net income $3,628 $4,121 $7,623 $8,475
======== ======== ======== ========
Basic earnings per share $0.39 $0.45 $0.83 $0.93
======== ======== ======== ========
Weighted average number of shares
outstanding (in thousands) 9,189 9,103 9,169 9,084
======== ======== ======== ========
Diluted earnings per share $0.38 $0.44 $0.81 $0.92
======== ======== ======== ========
Diluted weighted average number
of shares outstanding (in
thousands) 9,432 9,375 9,448 9,205
======== ======== ======== ========
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. dollars in thousands)
September 30, March 31,
2004 2004
---- ----
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 16,454 $ 30,193
Restricted cash 1,039 390
Accounts receivable, net 29,407 18,957
Inventories 21,525 16,174
Prepaid expenses and other
current assets 4,944 2,952
Income taxes receivable 127 127
----------- -----------
Total current assets 73,496 68,793
Property, plant and equipment - net 51,993 44,261
Investment in associates 2 2
Goodwill 478 478
----------- -----------
Total assets $ 125,969 $ 113,534
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,186 $ 11,168
Bank loan 903 -
Customer deposits and accrued
expenses 6,779 4,619
Income taxes payable 316 130
----------- -----------
Total current liabilities 23,184 15,917
----------- -----------
Deferred income tax - 15
----------- -----------
Minority interests 9,158 7,872
----------- -----------
Shareholders' equity
Common stock
- authorized 30,000,000 shares;
issued and outstanding
9,209,085 shares at September 30,
2004 and 9,149,085 at March 31, 2004 30,660 29,980
Additional paid-in capital 6,970 6,970
Retained earnings 55,997 52,780
----------- -----------
Total shareholders' equity 93,627 89,730
----------- -----------
Total liabilities and
shareholders' equity $ 125,969 $ 113,534
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