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Deswell Announces First Half 2018 Results
MACAO–(BUSINESS WIRE)–Deswell Industries, Inc. (Nasdaq: DSWL) today announced its unaudited
financial results for the first six months ended September 30, 2017.
Net sales for the first six months ended September 30, 2017 were $29.8
million, an increase of 44.2% compared to net sales of $20.6 million for
the six months ended September 30, 2016. Net sales increased by 30.6% to
$13.8 million in the plastic segment and increased by 58.4% to $16.0
million in the Company’s electronic segment.
Total gross margin increased to 19.6% of net sales during the six months
ended September 30, 2017, as compared to 14.3% of net sales in the same
period last year. Gross profit margin in the plastic segment increased
to 24.3% of net sales for the first half of fiscal 2018, compared to
17.9% 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 lower factory overhead, offsetting a slight increase in raw
material and labor costs, as a percentage of sales. Gross profit margin
in the electronic segment increased to 15.5% of net sales for the first
half of fiscal 2018, compared to 10.5% of net sales for the
corresponding period of last fiscal year. The increase in gross profit
and margin in the electronic segment was mainly attributable to a
decrease in labor cost and factory overhead, as a percentage of net
sales. The operating income in the first half of fiscal 2018 was $1.6
million, compared to an operating loss of $1.8 million for the same
period of fiscal 2017.
The Company reported net income of $3.7 million for the six months ended
September 30, 2017, compared to net income of $0.7 million for the six
months ended September 30, 2016. This was primarily due to an increase
in gross profit and decrease in SG&A expense, as a percentage of sales,
for the six months ended September 30, 2017. Deswell reported basic and
diluted income per share of $0.23 for the first half of fiscal 2018
(based on 15,885,000 weighted average shares outstanding), compared to
basic and diluted income per share of $0.04 (based on 16,056,000
weighted average shares outstanding), for the six months ended September
30, 2016.
The Company's financial position remained strong, with $11.7 million in
cash and cash equivalents and working capital totaled $42.7 million as
of September 30, 2017. Furthermore, the Company has no long-term or
short-term borrowings as of September 30, 2017.
Mr. Edward So, Chief Executive Officer, commented, “Our strong operating
performance in the first half of 2018 is a result of the strategic
initiatives we have focused on over the past few years. The top line
growth reflects our efforts to drive revenue by expanding business with
existing customers and adding new customers; both our plastic and
electronic assembly segments saw strong growth in the period.
Furthermore, we have continued to reduce costs, enabling us to achieve
enhanced margins and considerable growth in earnings per share. Our
pipeline is healthy, and we remain diligently focused on aligning with
the right customers and products.”
First Half Dividend
The Company also announces that its board of directors today decided no
cash dividend will be paid for the first half of the fiscal year ended
September 30, 2017. The Company expects the distribution of dividend
will be resumed no later than March 31, 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, INC. | ||||
| CONSOLIDATED BALANCE SHEET | ||||
| ( U.S. dollars in thousands) | ||||
| September, 30 | March 31, | |||
|
2017 |
2017 |
|||
| ASSETS | (Unaudited) | (Audited) | ||
| Current assets : | ||||
| Cash and cash equivalents | $ | 11,713 | $ | 8,078 |
| Fixed deposits maturing over three months | 2,116 | 5,422 | ||
| Marketable securities (note 2) | 15,850 | 16,327 | ||
| Accounts receivable, net | 15,023 | 13,159 | ||
| Inventories (note 3) | 13,211 | 10,688 | ||
| Prepaid expenses and other current assets | 1,976 | 2,419 | ||
| Total current assets | 59,889 | 56,093 | ||
| Property, plant and equipment – net | 31,492 | 31,992 | ||
| Time deposits maturing over twelve months | 4,521 | 2,902 | ||
| Total assets | $ | 95,902 | $ | 90,987 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities | ||||
| Accounts payable | $ | 6,995 | $ | 5,152 |
| Accrued payroll and employee benefits | 5,408 | 4,643 | ||
| Customer deposits | 2,102 | 2,152 | ||
| Other accrued liabilities | 1,217 | 1,474 | ||
| Income taxes payable | 530 | 476 | ||
| Deferred income tax liabilities | 892 | 889 | ||
| Total current liabilities | 17,144 | 14,786 | ||
| Shareholders' equity | ||||
| Common shares nil par value; authorized 30,000,000 shares; | ||||
|
15,885,239 shares issued & outstanding as of September 30, 2017 and March 31, 2017 |
53,063 | 53,063 | ||
| Additional paid-in capital | 5,184 | 5,184 | ||
| Accumulated other comprehensive income | 5,316 | 5,316 | ||
| Retained earnings | 15,195 | 12,638 | ||
| Total shareholders' equity | 78,758 | 76,201 | ||
| Total liabilities and shareholders' equity | $ | 95,902 | $ | 90,987 |
| DESWELL INDUSTRIES, INC. | ||||
| CONSOLIDATED STATEMENT OF OPERATIONS & | ||||
| COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | ||||
| ( U.S. dollars in thousands, except per share data ) | ||||
| Six months ended | ||||
| September 30, | ||||
|
2017 |
2016 |
|||
| Net sales | $ | 29,759 | $ | 20,634 |
| Cost of sales | 23,938 | 17,687 | ||
| Gross profit | 5,821 | 2,947 | ||
| Selling, general and administrative expenses | 4,434 | 4,526 | ||
| Other income (expense), net | 198 | (239) | ||
| Operating income (loss) | 1,585 | (1,818) | ||
| Non-operating income, net (note 3) | 2,130 | 2,616 | ||
| Income before income taxes | 3,715 | 798 | ||
| Income taxes | 46 | 87 | ||
| Net income attributable to Deswell Industries, Inc. | $ | 3,669 | $ | 711 |
| Other comprehensive income | $ | – | $ | – |
| Comprehensive income (loss) attributable to Deswell Industries, Inc. | $ | 3,669 | $ | 711 |
| Net income per share attributable to | ||||
| Deswell Industries, Inc. (note 4) | ||||
| Basic: | ||||
| Net income (loss) per share | $ | 0.23 | $ | 0.04 |
| Weighted average common shares outstanding | ||||
| shares (in thousands) | 15,885 | 16,056 | ||
| Diluted: | ||||
| Net income (loss) per share | $ | 0.23 | $ | 0.04 |
| Weighted average number of shares | ||||
| outstanding (in thousands) | 15,885 | 16,056 | ||
| DESWELL INDUSTRIES, INC. | ||||
| CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) | ||||
| ( U.S. dollars in thousands ) | Six months ended | Six months ended | ||
| September 30, | September 30, | |||
|
2017 |
2016 |
|||
| Cash flows from operating activities : | ||||
| Net income (loss) | $ | 3,669 | $ | 711 |
| Adjustments to reconcile net income to net cash | ||||
| provided by operating activities : | ||||
| Depreciation and amortization | 1,054 | 1,118 | ||
| (Reversal of) provision for doubtful accounts | (84) | 62 | ||
| Allowances for obsolete inventories | 85 | (13) | ||
| Loss on disposal of property, plant and equipment | 17 | 110 | ||
| Unrealized holding gain on marketable securities | (537) | (1,626) | ||
| Realized holding gain on disposal of marketable securities | (340) | (69) | ||
| Realized loss on disposal of available-for-sale securities | – | 14 | ||
| Scrip dividend received | (139) | (58) | ||
| Deferred tax | 3 | 22 | ||
| Changes in operating assets and liabilities : | ||||
| Accounts receivable | (1,780) | (1,911) | ||
| Inventories | (2,608) | (1,785) | ||
| Prepaid expenses and other current assets | 443 | (263) | ||
| Accounts payable | 1,843 | 3,051 | ||
| Accrued payroll and employee benefits | 765 | 575 | ||
| Customer deposits | (50) | 899 | ||
| Other accrued liabilities | (257) | 45 | ||
| Income taxes payable | 54 | 39 | ||
| Net cash provided by (used in) operating activities | 2,138 | 921 | ||
| Cash flows from investing activities | ||||
| Purchase of property, plant and equipment | (577) | (397) | ||
| Proceeds from disposal of property, plant and equipment, | 6 | 875 | ||
| Purchase of marketable securities | (435) | (2,951) | ||
| Proceeds from disposal of marketable securities | 1,928 | 920 | ||
| Proceeds from disposal of available-for-sale securities | – | 1,600 | ||
| Increase in fixed deposits maturing over three months | 3,306 | (1,598) | ||
| Decrease in fixed deposits maturing over twelve months | (1,619) | 74 | ||
| Net cash provided by (used in) investing activities | 2,609 | (1,477) | ||
| Cash flows from financing activities | ||||
| Dividends paid | (1,112) | (1,124) | ||
| Net cash used in financing activities | (1,112) | (1,124) | ||
| Cash effect of exchange rate changes | – | – | ||
| Net increase (decrease) in cash and cash equivalents | 3,635 | (1,680) | ||
| Cash and cash equivalents, at beginning of period | 8,078 | 11,996 | ||
| Cash and cash equivalents, at end of period | 11,713 | 10,316 | ||
| Supplementary disclosures of cashflow information: | ||||
| Cash paid during the period for: | ||||
| Interest | – | – | ||
| Income taxes | 8 | 26 | ||
Contacts
Investor Relations:
Institutional Marketing Services (IMS)
John
Nesbett/Jennifer Belodeau, 203-972-9200
