Deswell Announces Second Half 2020 Results

- Company Announces Second Half Cash Dividend of 0.09 Per Share -

MACAO--()--Deswell Industries, Inc. (Nasdaq: DSWL) today announced its unaudited financial results for the second half of the fiscal year ended March 31, 2020.

Net sales for the six months ended March 31, 2020 were $27.7 million, a decrease of 13.0% compared to net sales of $31.8 million for the six months ended March 31, 2019. Net sales decreased by 29.5% to $10.7 million in the plastic segment and increased by 2.0% to $17.0 million in the Company’s electronic segment.

Total gross margin increased to 19.2% during the six months ended March 31, 2020, as compared to 17.2% in the same period last year. Gross profit margin in the plastic segment increased to 23.3% of net sales for the second half of fiscal 2020, as compared to 20.9% of net sales for the corresponding period of last fiscal year. The increase in gross profit margin in the plastic segment was mainly due to decrease in raw materials cost, offsetting the increases in labor cost, as well as in factory overhead, as a percentage of sales. Gross profit margin for the electronic segment for the six months ended March 31, 2020 increased from 13.9% in second half of fiscal 2019 to 16.7% in the second half of fiscal 2020. The increase was mainly due to the reduction in labor cost as a result of the implementation of cost control measures.

Operating income for the second half of fiscal 2020 remained approximately the same as the same period of fiscal 2019 at $0.3 million.

The Company reported net loss of $2.6 million for the six months ended March 31, 2020, as compared to net income of $1.5 million for the six months ended March 31, 2019. Non-operating expense for the six months ended March 31, 2020 was $2.6 million, as compared to non-operating income of $1.4 million in the year-ago six months. Non-operating expense during the six months ended March 31, 2020 was primarily comprised of $3,927,000 from a decrease in the fair value of marketable securities, offsetting rental income of $761,000, dividend income of $485,000 from securities investment, and interest income of $126,000. Deswell reported basic and diluted loss per share of $0.16 for the second half of fiscal 2020 (based on 15,915,000 and 15,966,000 weighted average shares outstanding, respectively), as compared to basic and diluted income share of $0.10 (based on 15,885,000 and 15,969,000 weighted average shares outstanding), for the six months ended March 31, 2019.

Net sales for the year ended March 31, 2020 were $65.4 million, a decrease of 1.8% compared to net sales of $66.6 million for fiscal 2019. Operating income for the year ended March 31, 2020 increased to $1.4 million, as compared to operating income of $0.5 million for fiscal 2019. The Company reported net loss of $1.3 million in fiscal 2020, as compared to net income of $4.3 million for the year ended March 31, 2019. The decrease in net income was mainly attributed to the non-operating expense of $2.4 million in fiscal 2020, as compared to the non-operating income of $3.9 million in fiscal 2019. Deswell reported basic and diluted net loss per share of $0.08 for fiscal 2020, (based on 15,914,000 and 16,020,000 weighted average share outstanding, respectively), as compared to basic and diluted income per share of $0.27 (based on 15,855,000 and 16,059,000 weighted average shares outstanding), for the prior fiscal year.

The Company's financial position remained strong, with $22.5 million in cash and cash equivalents and working capital totaled $51.1 million as of March 31, 2020. Furthermore, the Company has no long-term or short-term borrowings as of March 31, 2020.

Mr. Edward So, Chief Executive Officer, commented, “We are pleased with our fiscal 2020 results which included a strong increase in operating income despite challenges related to Covid-19 and trade conflicts. Our first priority has been the safety of our employees and to that end we delayed the reopening of our facilities following the Chinese New Year holiday, which resulted in lost production days. Supply chain interruptions also presented some headwinds but we managed through those challenges and have been able to support our customers.

“While we continue to see demand negatively impacted by the international economic environment, we continue to nurture new customer relationships which we are optimistic can develop into larger commitments. One of the many strengths of our company is our strong balance sheet which enables us to weather challenging periods and stay focused on the long term performance of the business. Finally, we brought expenses down in fiscal 2020 and will continue to proactively manage costs to maximize operating profitability for our shareholders.”

Second Half Dividend

The Company also announces that its board of directors today declared a cash dividend of $0.09 per share for the second half of the fiscal year ended March 31, 2020. The dividend will be payable on July 10, 2020 to shareholders of record as of June 25, 2020.

Dividends to be declared in the future will depend upon the Company’s future growth and earnings, of which there can be no assurance, and the Company’s cash flow needs for future development.

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)

 

 

 

 

 

 

 

March 31,

 

March 31,

 

 

2020

 

2019

ASSETS

(Unaudited)

(Audited)

 

Current assets :

Cash and cash equivalents

$

22,514

 

$

14,371

 

Time deposits maturing over three months

 

783

 

 

371

 

Marketable securities (note 2)

 

19,441

 

 

24,446

 

Accounts receivable, net

 

12,301

 

 

15,734

 

Inventories (note 3)

 

8,578

 

 

13,030

 

Prepaid expenses and other current assets

 

1,752

 

 

2,006

 

Total current assets

 

65,369

 

 

69,958

 

Property, plant and equipment - net

 

28,586

 

 

30,211

 

Time deposits maturing over twelve months

 

1,424

 

 

-

 

Total assets

$

95,379

 

$

100,169

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

Current liabilities

Accounts payable

$

4,604

 

$

6,253

 

Accrued payroll and employee benefits

 

6,077

 

 

5,676

 

Customer deposits

 

1,172

 

 

1,298

 

Other accrued liabilities

 

1,718

 

 

1,662

 

Income taxes payable

 

735

 

 

657

 

Total current liabilities

 

14,306

 

 

15,546

 

Deferred income tax liabilities

 

751

 

 

659

 

Total liabilities

 

15,057

 

 

16,205

 

 
 

Shareholders' equity

Common shares nil par value - authorized 30,000,000 shares, 17,031,810 and 17,061,810 shares issued as of March 31, 2019 and 2020; 15,885,239 and 15,915,239 shares outstanding as of March 31, 2019 and 2020

 

53,143

 

 

53,063

 

Treasury stock at cost; 1,146,571 and 1,146,571 shares as of March 31, 2019 and 2020

 

(2,821

)

 

(2,821

)

Additional paid-in capital

 

7,989

 

 

8,005

 

Accumulated other comprehensive income

 

5,316

 

 

5,316

 

Retained earnings

 

16,695

 

 

20,401

 

Total shareholders' equity

 

80,322

 

 

83,964

 

Total liabilities and shareholders' equity

$

95,379

 

$

100,169

 

 

DESWELL INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(U.S. dollars in thousands, except per share data)

 

 

 

 

 

 

 

Six months ended

 

Year ended

 

 

March 31,

 

March 31,

 

 

 

2020

 

 

 

2019

 

 

2020

 

 

 

2019

 

 

Net sales

$

27,655

$

31,786

$

65,368

 

$

66,581

Cost of sales

 

22,335

 

26,306

 

53,504

 

 

56,311

Gross profit

 

5,320

 

5,480

 

11,864

 

 

10,270

Selling, general and administrative expenses

 

4,818

 

4,696

 

10,026

 

 

9,459

Other expense, net

 

245

 

501

 

425

 

 

278

Operating income

 

257

 

283

 

1,413

 

 

533

Non-operating income, (expense), net

 

(2,579

)

 

1,402

 

(2.360

)

 

3,884

Income (loss) before income taxes

 

(2,322

)

 

1,685

 

(947

)

 

4,417

Income taxes

 

247

 

169

 

373

 

 

144

Net income (loss) attributable to Deswell Industries, Inc.

$

(2,569

)

$

1,516

$

(1,320

)

$

4,273

 

 

Other comprehensive income

 

 

$

-

$

-

$

-

 

$

-

Total comprehensive income (loss) attributable to Deswell Industries, Inc.

$

(2,569

)

$

1,516

$

(1,320

)

$

4,273

 

 

 

 

Net income per share attributable to Deswell Industries, Inc. (note 4)

 

 

Basic:

 

 

Net income (loss) per share

$

(0.16

)

$

0.10

$

(0.08

)

$

0.27

Weighted average common shares outstanding shares (in thousands)

 

15,915

 

15,885

 

15,914

 

 

15,885

 

 

Diluted:

 

 

Net income (loss) per share

$

(0.16

)

$

0.10

$

(0.08

)

$

0.27

Weighted average common shares outstanding shares (in thousands)

 

15,966

 

15,969

 

16,020

 

 

16,059

DESWELL INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

 

( U.S. dollars in thousands )

Year ended

Mar 31,

 

2020

 

 

2019

 

Cash flows from operating activities :

Net (loss) income

$

(1,320

)

$

4,273

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

 

1,973

 

 

2,114

 

Provision for doubtful accounts, net

 

297

 

 

403

 

Additional charges for obsolescence allowance of inventories, net

 

426

 

 

256

 

(Gain) loss on disposal of property, plant and equipment

 

(29

)

 

22

 

Unrealized holding loss (gain) on marketable securities

 

5,179

 

 

(891

)

Gain on sales of marketable securities

 

(29

)

 

(746

)

Deferred income tax

 

92

 

 

(116

)

Scrip dividend received

 

356

 

 

(33

)

Changes in operating assets and liabilities :

Accounts receivable

 

3,136

 

 

(225

)

Inventories

 

4,026

 

 

(353

)

Prepaid expenses and other current assets

 

254

 

 

261

 

Accounts payable

 

(1,649

)

 

(2,343

)

Accrued payroll and employee benefits

 

401

 

 

110

 

Customer deposits

 

(126

)

 

(409

)

Other accrued liabilities

 

56

 

 

(211

)

Income taxes payable

 

78

 

 

54

 

Net cash provided by operating activities

 

13,121

 

 

2,166

 

 

Cash flows from investing activities

Purchase of property, plant and equipment

 

(507

)

 

(878

)

Proceeds from sale of property, plant and equipment, net of transaction costs

 

188

 

 

25

 

Purchase of marketable securities

 

(2,121

)

 

(12,704

)

Proceeds from sales of marketable securities

 

1,620

 

 

7,210

 

Release of (increase in) fixed deposits maturing over three months

 

(412

)

 

1,819

 

(Increase) decrease in fixed deposits maturing over twelve months

 

(1,424

)

 

3,129

 

Net cash used in investing activities

 

(2,656

)

 

(1,399

)

 

Cash flows from financing activities

Dividends paid

 

(2,386

)

 

(1,588

)

Exercise of stock options

 

64

 

 

-

 

Net cash used in financing activities

 

(2,322

)

 

(1,588

)

 

Net (decrease) increase in cash and cash equivalents

 

8,143

 

 

(821

)

Cash and cash equivalents, beginning of year

 

14,371

 

 

15,192

 

Cash and cash equivalents, end of year

 

22,514

 

 

14,371

 

 

Supplementary disclosures of cash flow information :

Cash paid during the year for :

Interest

 

-

 

 

-

 

Income taxes

 

160

 

 

149

 

 

Contacts

Investor Relations Contact:
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203.972.9200

Contacts

Investor Relations Contact:
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203.972.9200