Deswell Industries Announces Fourth Quarter and Year-End Results.- 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 Increase 16% For The Quarter - - Company also Announces Fourth Quarter Dividend of $0.17 Per Share - MACAO -- Deswell Industries, Inc. (Nasdaq: DSWL) today announced it financial results for the fourth quarter and year ended March 31, 2007. Net sales for the year ended March 31, 2007 were $136.8 million, an increase of 18.7% compared to sales of $115.3 million for the year ended March 31, 2006. 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 43.4% to $13.7 million, compared to $9.6 million for the year ended March 31, 2006, and net income increased 38.6% to $12.2 million, compared to $8.8 million in the previous year. Basic net income per share 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 increased to $0.81 and $0.81, respectively (based on 14,948,000 and 15,040,000 weighted average shares outstanding, respectively), compared to $0.59 and $0.59, respectively (based on 14,908,000 and 14,936,000 weighted average shares outstanding, respectively), for the year ended March 31, 2006. Deswell reported that net sales for the fourth quarter ended March 31, 2007 were $30.4 million, compared to $26.2 million for the same quarter of 2006, an increase of 16.0%. Revenues at Deswell's electronic assembly division increased 37.0% in the fourth quarter while revenues at the company's plastics division decreased 9.1% compared to the corresponding period in the previous year. Total gross margin decreased to 17.1% in the fourth quarter ended March 31, 2007 from 19.2% in the fourth quarter last year. Gross profit in the plastic segment increased to 29.4% of net sales for the quarter compared to 24.4% of net sales for the year-ago quarter. The improved gross margin in the plastic segment was mainly a combined effect of a change in customer and product mix to higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. orders and a provision for obsolete stock of $645,000 that had been made in the quarter last year but not in the quarter ended March 31, 2007. Gross profit in the electronic and metallic segment decreased to 10.4% of net sales for the quarter ended March 31, 2007 compared to 14.8% of net sales for the year-ago quarter. The decrease was mainly attributed to a 3.7% increase in material cost as a percentage of sales due to a write-off of obsolete stock of $296,000 as well as a stock provision of $193,000 in the quarter. Furthermore, there was an approximately 3.8% appreciation in Chinese renminbi
"CNY" and "RMB" redirect here. For other uses, see CNY (disambiguation) and RMB (disambiguation). currency as compared with year-ago quarter and labor cost in the electronics division rose to 5.1% of net sales versus 3.3% of net sales for the quarter a year ago. Operating income totaled $1.8 million, compared to $0.2 million for the same quarter of 2006. Net income for the quarter increased to $1.6 million compared to $0.5 million for the year-ago quarter. Basic net income per share and diluted net income per share for the quarter increased to $0.10 and $0.10, respectively (based on 15,023,000 and 15,159,000 weighted average shares outstanding, respectively), compared to $0.03 and $0.03, respectively (based on 14,924,000 and 14,924,000 weighted average shares outstanding, respectively), for the quarter ended March 31, 2006. Other operating income for the quarter increased $1,810,000 to $1,069,000 compared to other expenses of $741,000 for the quarter ended March 31, 2006. On a segment basis, other operating income attributable to the plastic segment was $1,147,000, an increase of $1,898,000 as compared with other expenses of $751,000 for the quarter in last year. The increase was mainly attributed to a one-time exchange transaction adjustment of $1,166,000 of a subsidiary having a non-United States dollar functional currency reclassified from the exchange reserve in this quarter and a doubtful account receivable account receivable Any amount owed to a business as the result of a purchase of goods or services from it on a credit basis. Although the firm making the sale receives no written promise of payment, it enters the amount due as a current asset in its books. provision of $970,000 in the quarter ended March 31, 2006 relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc a telecommunication customer's financial issues due to a failed European product launch but nil in this quarter. This offset the increase in loss on disposal of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → of $19,000 which is mainly related to the closure of one of our subsidiaries in the quarter ended March 31, 2007, and the tax refunded Tax refund Money back from the government when too much tax has been paid or withheld from a salary. on reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. of certain retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. in one of our PRC subsidiaries of $173,000 in the quarter last year. The Company's balance sheet remains strong, with cash and cash equivalents on March 31, 2007 totaling $24.5 million, compared to $25.4 million on March 31, 2006. Working capital totaled $58.7 million as of March 31, 2007, versus $55.1 million as of March 31, 2006. The Company has no long-term or short-term borrowings. Mr. Franki Tse, chief executive officer, commented, "Overall sales growth for the year was strong driven largely by the sales increase at our electronic assembly division as a result of our expanding business with some of the top professional and high end consumer audio companies. There continues to be strong momentum in this business as our established reputation for manufacturing quality audio equipment such as professional mixing boards and amplifiers expands. The decline in plastics revenue in the fourth quarter was largely due to the timing of new product introductions and we are confident that revenue in the plastics division will improve over the next few quarters evidenced by a recent pick-up in mold mold, name for certain multicellular organisms of the various classes of the kingdom Fungi, characteristically having bodies composed of a cottony mycelium. The colors of molds are caused by the spores, which are borne on the mycelium. making activity. "Nonetheless, increases in the labor rate, tax and renminbi over the course of the past year have impacted margins. We were able to slightly offset these increases with the closing of our Shenzhen facility last quarter, and we have redoubled re·dou·ble v. re·dou·bled, re·dou·bling, re·dou·bles v.tr. 1. To double. 2. To repeat. 3. Games To double the doubling bid of (an opponent) in bridge. v. our efforts to drive costs down to maximize profitability. Capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. is running at over 95% at our electronics division. In order to leverage the available space at the plastic factory, we are adding some electronics manufacturing This article presents a typical manufacturing process of an electronic assembly. Component manufacturing Components such as resistors, capacitors and integrated circuits are generally made by specialized contractors. lines at our plastics facility which also provides additional synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. between the two divisions." Mr. Tse concluded, "A key aspect of our long-term strategy is to continue to enhance our capabilities to provide higher margin products to customers. For example, at our plastics division we are in the process of installing a new, state-of-the-art clean room that will have one of the highest quality standards in the industry." Fourth Quarter Dividends The Company also announced that on June 26, 2007 its board of directors declared a dividend of $0.17 per share for the fourth quarter, bringing cash dividends per share Dividends per share Dividend paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term. for the year ended March 31, 2007 to $0.68 per share. The dividend will be payable on July 26, 2007 to shareholders of record as of July 5, 2007. 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 Communicating information, including data, text, pictures, voice and video over long distance. See communications. 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 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]
DESWELL INDUSTRIES, INC.
Consolidated Balance Sheet
(U.S. dollars in thousands)
March 31, March 31,
2007 2006
---- ----
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 24,549 $ 25,369
Restricted cash - 649
Marketable securities 107 164
Accounts receivable, net 21,063 18,318
Inventories 29,495 21,845
Prepaid expenses and other
current assets 4,999 5,035
Income taxes receivable 130 -
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Total current assets 80,343 71,380
Property, plant and equipment - net 60,157 58,286
Deferred income tax assets - 294
Goodwill 710 710
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Total assets $ 141,210 $ 130,670
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,865 $ 10,886
Dividend payable - 2,089
Customer deposits and accrued expenses 5,035 3,107
Deferred income tax 321 -
Income taxes payable 450 184
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Total current liabilities 21,671 16,266
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Minority interests 7,884 7,636
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Shareholders' equity
Common stock
- authorized 30,000,000 shares;
issued and outstanding 15,038,730
shares at March 31, 2007 and
14,923,730 at March 31, 2006 43,024 41,254
Additional paid-in capital 6,970 6,970
Accumulated other comprehensive income 1,106 436
Retained earnings 60,555 58,108
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Total shareholders' equity 111,655 106,768
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Total liabilities and
shareholders' equity $ 141,210 $ 130,670
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