Deswell Industries, Inc. announces third quarter results; sales increase 29%, operating income up 69%.HONG n. 1. A mercantile establishment or factory for foreign trade in China, as formerly at Canton; a succession of offices connected by a common passage and used for business or storage. KONG--(BUSINESS WIRE)--Feb. 6, 1996--Deswell Industries, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on NM: DSWLF and DSWWF) (the "Company") today announced its results for the third quarter ended December December: see month. 31, 1995. 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 were $7.8 million, an increase of 29% compared to sales of $6.0 million in the third quarter ended December 31, 1994. 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. increased 69% to $2.1 million, compared to $1.2 million in the previous year, and net income increased 68% to $1.8 million, compared to $1.1 million in the previous year. Earnings per share increased 33% to $0.40, compared to $0.32 in the third quarter ended December 31, 1994. Net sales for the nine months ended December 31, 1995 were $23.1 million, a jump of 56% compared to sales of $14.8 million for the corresponding period in 1994. Operating income increased 66% to $5.4 million, compared to $3.3 million in the previous year and net income increased 48% to $4.4 million, compared to $3.0 million in the previous year. Earnings per share increased 24% to $1.09, compared to $0.88 for the nine months ended December 31, 1994. 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, Chief Executive Officer commented "We are pleased to report that we have completed another quarter with strong performance. The Company continues to witness steady growth in both our divisions, especially our electronic products operations. As previously announced, we have leased additional factory space and purchased state-of-the-art injection molding injection molding n. A manufacturing process for forming objects, as of plastic or metal, by heating the molding material to a fluid state and injecting it into a mold. and heavy tooling machines during the quarter to accommodate our growth. In addition, we are pleased about our ISO (1) See ISO speed. (2) (International Organization for Standardization, Geneva, Switzerland, www.iso.ch) An organization that sets international standards, founded in 1946. The U.S. member body is ANSI. 9002 quality certification attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. during the quarter which should help us continue to secure new business in the future." Mr Lau concluded, "Our financial position is strong. Working capital was $14.1 million as of December 31, 1995 as compared to $4.0 million as of March 31, 1995, and the current ratio was 5.0 with no long term debt." Deswell manufactures injection-molded plastic parts and components and electronic products and subassemblies 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 pin-through hole ("PTH PTH abbr. parathyroid hormone Parathyroid hormone (PTH) A chemical substance produced by the parathyroid glands. This hormone is a major element in regulating calcium in the body. ") interconnection in·ter·con·nect v. in·ter·con·nect·ed, in·ter·con·nect·ing, in·ter·con·nects v.intr. To be connected with each other: The two buildings interconnect. v.tr. technologies; and finished products such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and computer peripherals. The Company's customers include Mita Industries (H.K.) Limited, Nam Nam Vietnam. NAM (US) n abbr (= National Association of Manufacturers) → nationaler Verband der verarbeitenden Industrie Tai Tai, lake, China Tai (tī), lake, c.1,300 sq mi (3,370 sq km), on the border between Jiangsu prov. and Zhejiang prov., E China; second largest freshwater lake in China. Dotted with islands, it is one of China's most scenic areas. Electronics (Shenzhen Shenzhen (shĕn`jŭn`), city (1994 est. pop. 695,600), S Guangdong prov., China, on the South China Sea, N of Hong Kong. Designated a special economic zone in 1979, the city's spectacular economic growth led China to create over a dozen more ) Co. Ltd., Inter-Tel Incorporated, Behringer BEHRINGER Spezielle Studiotechnik GmbH (Behringer) is a German audio equipment manufacturer, founded in its present form in 1989. Products The company designs and manufactures audio products, including public address systems, mixing consoles, amplifiers and spezeiller studytechnik GMBH, and Shakespeare (H.K.) Limited. -0-
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(U.S. dollars in thousands )
Nine months ended
December 31,
1995 1994
Cash flows from operating
activities:
Net income $4,437 $2,991
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 999 689
Loss on sale of property,
plant and equipment 24 92
Minority interests 989 154
Changes in current assets
and liabilities:
Increase in accounts receivable (1,964) (404)
Increase in inventories (649) (663)
Decrease (increase) in
prepaid expenses (114) (197)
and other current assets
Increase in income taxes receivable (13) (127)
Increase in accounts payable 95 44
Increase in customer deposits
and accrued expenses 943 148
Increase in income taxes payable 172 61
Net cash provided by operating
activities 4,919 2,788
Cash flows from investing activities
Purchase of property, plant
and equipment (4,046) (1,633)
Repayment to related parties - (45)
Advance to related parties - (634)
Increase in restricted cash (1,293) -
Net cash used in investing
activities (5,339) (2,312)
Cash flows from financing activities
Cash from issued shares
under IPO (adjusted for
expenses already paid
at March 31, 1995 of $265) 8,164 -
Dividends paid - (1,048)
Increase in long-term debt 729 454
Repayment of long-term debt (829) (656)
Increase in short-term borrowings 377 2,275
Repayment of short-term borrowings (2,267) (965)
Net cash provided by (used in)
financing activities 6,174 60
Net increase in cash and cash equivalents 5,754 536 Cash and cash equivalents, at beginning of period 1,144 220 Cash and cash equivalents, at end of period 6,898 756 Supplementary disclosures of cash flow information: Cash paid during the period for: Interest 158 173 Income taxes 45 92
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(U.S. dollars in thousands, except share and per share data)
Quarter ended Nine months ended
December 31, December 31,
1995 1994 1995 1994
Net Sales $ 7,778 $ 6,012 $ 23,093 $ 14,800 Cost of sales 4,169 3,671 13,676 9,066 Gross profit 3,609 2,341 9,417 5,734 Selling, general and administrative expenses 1,500 1,091 3,995 2,468 Operating income 2,109 1,250 5,422 3,266 Interest expense (28) (45) (157) (173) Other income, net 136 24 275 86 Income before income taxes 2,217 1,229 5,540 3,179 Income taxes 46 (15) 113 26 Income before minority interests 2,171 1,244 5,427 3,153 Minority interests 365 170 990 162 Net income $ 1,806 $ 1,074 $ 4,437 $ 2,991 Earnings per share $ 0.40 $ 0.32 $ 1.09 $ 0.88 Average number of shares outstanding 4,550 3,400 4,082 3,400 (in thousands)
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. dollars in thousands)
December 31, March 31,
1995 1995
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 6,898 $ 1,144
Restricted cash 2,198 905
Accounts receivable, net 5,031 3,067
Inventories 2,707 2,058
Prepaid expenses and other
current assets 532 418
Deferred public offering costs - 265
Income taxes receivable 229 216
Total current assets 17,595 8,073
Property, plant and equipment - net 6,901 3,867
Goodwill 252 263
Total assets $ 24,748 $ 12,203
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ - $ 1,890
Current portion of long-term debt 580 501
Accounts payable 1,463 1,281
Customer deposits and
accrued expenses 1,259 403
Income taxes payable 206 34
Total current liabilities 3,508 4,109
Long-term debt - 179
Minority interests 1,587 598
Deferred income tax 46 46
Shareholders' equity
Common stock
- authorized 20,000,000 shares;
issued and outstanding
4,550,000 shares at December 31,
1995 and 3,400,000 shares at
March 31, 1995 46 34
Additional paid-in capital 9,795 1,908
Retained earnings 9,766 5,329
Total shareholders' equity 19,607 7,271
Total liabilities and
shareholders' equity $ 24,748 $ 12,203
DESWELL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands except per share data)
1. Management's Statement
In the opinion of Management, the accompanying unaudited
financial statements contain all adjustments (all of which are normal
and recurring in nature) necessary to present fairly the financial
position of Deswell Industries, Inc. (the "Company") at December 31,
1995 and March 31, 1995, the results of operations for the quarters
and nine months ended December 31, 1995 and December 31, 1994, and
the cash flows for the nine months ended December 31, 1995 and
December 31, 1994. The notes to the Consolidated Financial
Statements which are contained in the Form F-1 Registration Statement
filed on July 18, 1995 under the Securities Act of 1993 should be
read in conjunction with these Consolidated Financial Statements.
2. Inventories
December 31, March 31,
1995 1995
Inventories by major categories:
Raw materials $ 1,232 $ 1,199
Work in progress 480 245
Finished goods 995 614
$ 2,707 $ 2,058
======== ========
3. Public Offering of Common Shares and Warrants In July July: see month. 1995, the Company completed its initial public offering in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (the "IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ") of 1,000,000 Common Shares at $8.625 per share and 1,000,000 Warrants at $0.01 per Warrant and the issuance in August 1995 of an additional 150,000 Common Shares and 150,000 Warrants upon the exercise of the over-allotment option by the underwriters in the IPO. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from this offering aggregated approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $7,912. 4. Earnings Per Share The primary earnings per share is computed on the net income divided by the weighted average number of Common Shares in issue throughout the relevant periods. The weighted average number of Common Shares in 1995 takes account of both the IPO 1,000,000 Common Shares issued in July 1995 and the Over-allotment 150,000 Common Shares issued in August 1995. The Stock Options and Warrants outstanding as at December 31, 1995 did not dilute di·lute v. To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water. adj. Thinned or weakened by diluting. the primary earnings per share by 3% or more. DESWELL INDUSTRIES, INC. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations General The Company's revenues are derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from the manufacture and sale of injection-molded plastic parts and components and of electrical products and subassemblies. The Company carries out all of its manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. in southern China, where it is able to take advantage of the lower overhead costs overhead costs see fixed costs. and inexpensive labor rates as compared to 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. . Three Months Ended December 31, 1995 Compared to Three Months Ended December 31, 1994 The Company's net sales for the three months ended December 31, 1995 were $7,778,000, an increase of $1,766,000 or 29.4% as compared to corresponding period in 1994. The increase in sales was mainly related to additional sales of injection-molded plastic and electronic products of $1,134,000 and $632,000 respectively, or increases of 30.8% and 27.2% as compared with the net sales in the corresponding period in the prior year. The Company has generated higher volume demands from its customers in this year as a result of the continuous efforts of striving for high quality standards of products. The gross profit for the quarter ended December 31, 1995 was $3,609,000, representing a gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. of 46.4%. This compares with the overall gross profit and gross profit margin of $2,341,000 or 38.9% for the quarter ended December 31, 1994. There was an increase in the overall gross profit margin of 7.5%. The margin on the sale of plastic parts and components declined slightly to 48.6% as compared to 48.9% in the previous year, although the overall gross profit margin contributed by plastic parts and components was 2,342,000 in 1995, an increase of $541,000 from the previous year. The gross profit margin on sales of electronic orders and subassemblies increased as the Company kept on concentrating its efforts on securing orders with higher margins. Gross margins on these products increased to 42.8% compared to 23.2% in the previous year, with a total gross profit contribution of $1,267,000, compared to $540,000 in the previous year. Selling, general and administrative expenses for the quarter ended December 31, 1995 were $1,500,000, amounting to 19.3% of total net sales, as compared to $1,091,000 or 18.1% of total net sales for the quarter ended December 31, 1994. The increase in selling, general and administrative expenses of $409,000 over the corresponding period was largely due to the growth in the Company's operations, additional expenses incurred for the ISO 9002 certification and additional salaries resulting from salary increments and bonuses to several senior management (non-directors) as well as new employees joining the Company. As a result of the increase in net sales, operating income was $2,109,000 for the quarter ended December 31, 1995, an increase of $859,000 or 68.7% as compared with the corresponding quarter in the prior year. Minority interests represent the 49% minority interest in the electronics subsidiary and the increase in minority interest to $365,000 for the quarter ended December 31, 1995 from $170,000 for the quarter ended December 31, 1994 reflects the fact that the electronic business generated significant profits in the current period as compared to the corresponding period in 1994. As a result of the above factors, net income was $1,806,000 for the quarter ended December 31, 1995, an increase of $732,000 or 68.2%, as compared to the quarter ended December 31, 1994 and net income as a percentage of net sales increased to 23.2% from 17.9%. Nine Months Ended December 31, 1995 Compared to Nine Months Ended December 31, 1994 The Company's net sales for the nine months ended December 31, 1995 were $23,093,000, an increase of $8,293,000 or 56.0% as compared to corresponding period in 1994. The substantial increase in sales was mainly related to additional sales of injection-molded plastic and electronic products of $4,373,000 and $3,920,000 respectively, or increases of 43.7% and 81.8% as compared with the net sales in the corresponding period in the prior year. The Company's electronic division has generated higher volume demands from its customers in this year as a result of the continuous efforts of striving for high-quality standards of products. The gross profit for the nine months ended December 31, 1995 was $9,417,000, representing a gross profit margin of 40.8%. This compares with the overall gross profit and gross profit margin of $5,734,000 or 38.7% for the nine months ended December 31, 1994. There was no material fluctuation Fluctuation A price or interest rate change. in the overall gross profit margin. The margin on the sale of plastic parts and components declined slightly to 40.3%, as compared to 44.4% in the previous year although the overall gross profit margin contributed by plastic parts and components was $5,798,000 in 1995, an increase of $1,353,000 from the previous year. The gross profit margin on sales of electronic orders and subassemblies increased as the Company kept on concentrating its efforts on securing orders with higher margins. Gross margins on these products increased to 41.5% compared to 26.9% in the previous year, with a total gross profit contribution of $3,619,000, compared to $1,289,000 in the previous year. Selling, general and administrative expenses for the nine months ended December 31, 1995 were $3,995,000, amounting to 17.3% of total net sales, as compared to $2,468,000 or 16.7% of total net sales for the nine months ended December 31, 1994. The increase in selling, general and administrative expenses of $1,527,000 over the corresponding period was largely due to the growth in the Company's operations, additional expenses incurred for the ISO 9002 certification and additional salaries resulting from salary increments and bonuses to several senior management (non-directors) as well as new employees joining the Company. As a result of the increase in net sales, operating income was $5,422,000 for the nine months ended December 31, 1995, an increase of $2,156,000 or 66.0% as compared with the corresponding period in the prior year. However, there was no material fluctuation in the overall operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . The operating margin for the nine months ended December 31, 1995 was 23.5%, as compared to 22.1% in the previous year. Minority interests represent the 49% minority interest in the electronics subsidiary and the increase in minority interest to $990,000 for the nine months ended December 31, 1995 from $162,000 for the nine months ended December 31, 1994 reflects the fact that the electronic business generated significant profits in the current period as compared to the corresponding period in 1994. As a result of the above factors, net income was $4,437,000 for the nine months ended December 31, 1995, an increase of $1,446,000 or 48.3%, as compared to the nine months ended December 31, 1994 and net income as a percentage of net sales decreased slightly to 19.2% from 20.2%. Liquidity and Capital Resources Traditionally, the Company has relied primarily upon internally generated funds and 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 (including trade finance facilities) to finance its operations and expansion, although capital expenditure has been partly financed by long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. , including capital leases. At December 31, 1995, the Company had a working capital surplus of $14,087,000. This compares with a working capital surplus of $3,964,000 at March 31, 1995. The substantial increase in working capital was mainly attributed to net proceeds generated from the Initial Public Offering in July 1995 of which $5,400,000 were temporarily invested as term deposits as of December 31, 1995. The Company has historically generated sufficient funds from its operating activities to finance its operations and there has been little need for external financing In the theory of capital structure, External financing is the phrase used to describe funds that firms obtain from outside of the firm. It is contrasted to internal financing which consists mainly of profits retained by the firm for investment. other than short-term borrowings which are used to finance accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and are generally paid from cash generated from operations and long-term debt used to finance capital expenditure. The Company has no outstanding short-term borrowings at December 31, 1995 and has total long-term debt (including the current portion) was $580,000. The Company's 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. capital leases are generally repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. over periods of up to two years, with the capital leases at December 31, 1995 being repayable through December 1996. The majority of the Company's long-term debt is repayable in the years ending March 31, 1996 and 1997. In order to fund equipment purchases for future expansion of its business, the Company completed the IPO in July 1995, as referred to above. At December 31, 1995, the Company had in place general banking facilities with four financial institutions aggregating approximately $7,752,000. Such facilities, which are subject to annual review, include overdrafts, letters of credit, import facilities, trust receipt financing, inward in·ward adj. 1. Located inside; inner. 2. Directed or moving toward the interior: an inward flow. 3. bills financing as well as fixed loans. At December 31, 1995, the Company had (i) unused credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities of $6,963,000 (ii) cash and cash equivalents of $6,898,000 and (iii) restricted cash of $2,198,000, which has been pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. as collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although for those credit facilities. The Company expects that working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. and capital additions will be funded through a combination of internally generated funds, existing facilities and the proceeds of IPO. CONTACT: Lippert/Heilshorn & Associates, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of John Nesbett, 212/838-3777 ext. 101 |
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