CONTACT:
John G. Nesbett
Lippert/Heilshorn & Associates, Inc.
212-838-3777, ext. 6631
e-mail: [email protected]
DESWELL INDUSTRIES, INC.
ANNOUNCES 54% INCREASE IN SECOND QUARTER REVENUES,
47% INCREASE IN OPERATING INCOME,
AND EPS OF $0.75 PER SHARE
- COMPANY ANNOUNCES INTERIM DIVIDEND OF $0.33 PER SHARE -
HONG KONG (November 6, 2000) - Deswell Industries, Inc. (Nasdaq Symbol: DSWL)
today announced results for the second quarter and six months ended September
30, 2000.
Net sales for the quarter were $24.8 million, an increase of 54.0% compared to
sales of $16.1 million in the second quarter ended September 30, 1999. Operating
income increased 47.0% to $5.07 million, compared to $3.45 million in the
previous year, and net income increased 20.2% to $4.01 million, compared to
$3.34 million in the previous year. Basic earnings per share and diluted
earnings per share increased to $0.75 and $0.74 respectively (based on 5,349,000
and 5,413,000 weighted average shares outstanding, respectively), compared to
$0.61 and $0.61 respectively (based on 5,476,000 and 5,481,000 weighted average
shares outstanding, respectively), in the second quarter ended September 30,
1999.
Net sales for the six months ended September 30, 2000 were $42.6 million, an
increase of 51.1% compared to sales of $28.2 million for the corresponding
period in 1999. Operating income increased 46.8% to $7.9 million, compared to
$5.4 million in the previous year, and net income increased 24.2% to $6.8
million, compared to $5.5 million in the previous year. Basic earnings per share
and diluted earnings per share increased to $1.27 and $1.26 respectively, (based
on 5,348,000 and 5,379,000 weighted average shares outstanding, respectively),
compared to $1.00 and $0.99 (based on 5,476,000 and 5,477,00 weighted average
shares outstanding, respectively), for the six months ended September 30, 1999.
The Company reported a continued strong financial position with a book value per
share of $10.63 and cash per share of $4.78. The Company has no short tem or
long term debt.
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Mr. Richard Lau, chief executive officer, said, "We are extremely pleased with
our strong revenue and earnings per share growth for the quarter. With improved
year-over-year performance across all subsidiaries, Jetcrown, our plastics
division, increased revenue by 33 percent and our electronics and metallics
divisions collectively increased revenue by 95 percent. These results are mainly
attributed to expanded business with our existing and new strong customer base
and a stable increase in orders from our electronics customers. The capacity
expansion underway at our plastics division, Jetcrown, is beginning to show
returns and is reflected in our sales increase."
Mr. Lau concluded, "Deswell is also pleased to announce that its second phase
investment in the Dongguan plastics facility will commence operation by December
2000. The second phase of our expansion will increase capacity of our tooling
division by over 60 percent."
INTERIM DIVIDEND
----------------
The Company also announced that on November 4, 2000, its board of directors
declared an interim cash dividend of $0.33 per share (2000 interim dividend
$0.33 per share). The dividend will be payable on December 7, 2000 to
shareholders of record as of November 22, 2000.
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 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 pin-through
hole ("PHT") interconnection technologies; and finished products such as
telephones, telephone answering machines, sophisticated studio-quality audio
equipment and computer peripherals. The Company's customers include Kyocera Mita
Industrial (H.K.) Limited, Epson Precision (H.K.) Ltd., Namtai Electronics
(Shenzhen) Co. Ltd., Inter-Tel Incorporated, Vtech Communications Ltd., and
Shakespeare (H.K.) Limited.
To learn more about Deswell Industries, Inc., please visit the Company's web
site at www.deswell.com
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<TABLE>
<CAPTION>
DESWELL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPRATIONS (UNAUDITED)
(U.S. DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATE)
Quarter ended Six months ended
September 30, September 30
---------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 24,809 $ 16,110 $ 42,595 $ 28,191
Cost of sales 15,654 9,383 27,185 16,872
-------- -------- -------- --------
Gross profit 9,155 6,727 15,410 11,319
Selling, general and administrative expenses 4,084 3,277 7,519 5,944
-------- -------- -------- --------
Operating income 5,071 3,450 7,891 5,375
Interest expense (5) -- (5) --
Other income, net (55) 310 174 645
-------- -------- -------- --------
Income before income taxes 5,011 3,760 8,060 6,020
Income taxes 259 172 463 359
-------- -------- -------- --------
Income before minority interests 4,752 3,588 7,597 5,661
Minority interests 741 252 829 212
-------- -------- -------- --------
Net income $ 4,011 $ 3,336 $ 6,768 $ 5,449
======== ======== ======== ========
Basic earnings per share (note 3) $ 0.75 $ 0.61 $ 1.27 $ 1.00
======== ======== ======== ========
Weighted average number of shares 5,349 5,476 5,348 5,476
outstanding (in thousands)
======== ======== ======== ========
Diluted earnings per share (note 3) $ 0.74 $ 0.61 $ 1.26 $ 0.99
======== ======== ======== ========
Diluted weighted average number of shares 5,413 5,481 5,379 5,477
outstanding (in thousands)
======== ======== ======== ========
</TABLE>
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<TABLE>
<CAPTION>
DESWELL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(U.S. DOLLARS IN THOUSANDS)
September 30, March 31,
2000 2000
---- ----
ASSETS (Unaudited)
Current assets :
<S> <C> <C>
Cash and cash equivalents $23,498 $27,156
Restricted cash 2,058 2,129
Marketable securities -- 1,308
Accounts receivable, net 19,557 10,607
Inventories 12,059 10,932
Prepaid expenses and other current assets 2,259 2,295
Income taxes receivable 164 164
------- -------
Total current assets 59,595 54,591
Property, plant and equipment - net 18,839 16,701
Goodwill 530 549
------- -------
Total assets $78,964 $71,841
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,555 $ 5,401
Customer deposits and accrued expenses 4,377 4,362
Income taxes payable 320 101
------- -------
Total current liabilities 12,252 9,864
------- -------
Deferred income tax 15 15
------- -------
Minority interests 9,749 8,931
------- -------
Shareholders' equity
Common stock
-- authorized 20,000,000 shares; issued
and outstanding 5,357,931 shares at
September 30, 2000 and 5,347,931 shares
at March 31, 2000 54 53
Additional paid-in capital 24,227 24,100
Retained earnings 32,667 28,878
------- -------
Total shareholders' equity 56,948 53,031
------- -------
Total liabilities and shareholders' equity $78,964 $71,841
======= =======
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
( U.S. DOLLARS IN THOUSANDS )
Six months ended
September 30,
-------------------
2000 1999
---- ----
Cash flows from operating activities :
<S> <C> <C>
Net income $ 6,768 $ 5,449
Adjustments to reconcile net income to net cash
provided by operating activities :
Depreciation and amortization 2,534 2,297
Loss on disposal of property, plant and equipment
15 3
Minority interests 830 237
Changes in current assets and liabilities :
Accounts receivable
(8,964) (3,522)
Marketable securities 1,306 134
Inventories (1,141) (1,404)
Prepaid expenses and other current asse 33 1,712
Income taxes receivable -- 180
Accounts payable 2,161 1,121
Customer deposits and accrued expenses 21 21
Income taxes payable 219 62
-------- --------
Net cash provided by operating activities 3,782 6,290
-------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (4,690) (3,427)
Acquisition, excluding cash acquired -- (32)
Increase in long term investment -- (499)
Purchase of property, plant and equipment 68 42
-------- --------
Net cash used in investing activities (4,622) (3,916)
-------- --------
Cash flows from financing activities
Common stock repurchased & cancelled -- (1,256)
Common Stock issued 159 --
Exchange difference on translation (35) --
Dividends paid (2,942) (3,012)
-------- --------
Net cash used in financing activities (2,818) (4,268)
-------- --------
Net decrease in cash and cash equivalents
(3,658) (1,894)
Cash and cash equivalents, at beginning of period 27,156 27,556
-------- --------
Cash and cash equivalents, at end of period 23,498 25,662
======== ========
Supplementary disclosures of cashflow information :
Cash paid during the period for :
Interest 5 --
Income taxes 244 116
======== ========
Acquisition of subsidiary, excluding cash acquired:
Goodwill -- 224
Minority Interests --
(192)
-------- --------
Cash paid, net of cash acquired -- 32
======== ========
</TABLE>
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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 September 30,
2000 and March 31, 2000, the results of operations for the quarters
and six months ended September 30, 2000 and September 30, 1999, and
the cash flows for the six months ended September 30, 2000 and
September 30, 1999. The notes to the Consolidated Financial
Statements, which are contained in the Form 20-F Annual Report filed
on July 6, 2000 under the Securities Exchange Act of 1934 should be
read in conjunction with these Consolidated Financial Statements.
2. INVENTORIES
-----------
September 30, March 31,
2000 2000
------- -------
Inventories by major categories :
Raw materials $ 6,684 $ 6,924
Work in progress 2,539 1,553
Finished goods 2,836 2,466
------- -------
$12,059 $10,932
======= =======
3. EARNINGS PER SHARE
------------------
The basic net income per share and diluted net income per share are
computed in accordance with the Statement of Financial Accounting
Standards No.128 "Earnings Per Share".
The basic net income per share is computed by dividing income
available to common holders by the weighted average number of common
shares outstanding during the period. Diluted net income per share
gives effect to all dilutive potential common shares outstanding
during the period. The weighted average number of common shares
outstanding is adjusted to include the number of additional common
shares that would have been outstanding if the dilutive potential
common shares had been issued. In computing the dilutive effect of
potential common shares, the average stock price for the period is
used in determining the number of treasury shares assumed to be
purchased with the proceeds from exercise of options.
The net income for the quarters and six months ended September 30,
2000 and 1999 were both from the Company's continuing operations.
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DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
GENERAL
-------
The Company's revenues are derived from the manufacture and sale of
(i) injection-molded plastic parts and components, (ii) electronic
products and subassemblies and (iii) metallic parts and components.
The Company carries out all of its manufacturing operations in
southern China, where it is able to take advantage of the lower
overhead costs and inexpensive labor rates as compared to Hong Kong.
QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO QUARTER ENDED SEPTEMBER
30, 1999
--------------------------------------------------------------------
The Company's net sales for the quarter ended September 30, 2000 were
$24,809,000, an increase of $8,699,000 or 54.0% as compared to
corresponding period in 1999. The significant increase in sales was
mainly related to the increase in sales of injection-molded plastic
products and electronics and metallic products of $3,530,000 and
$5,169,000, respectively. This represented increases of 33.1% and
95.0% respectively, as compared with the net sales in the
corresponding period in the prior year.
The increases in net sales in both operations were attributed to the
substantial increase in orders from its existing strong customer base
together with the new orders from new customers.
The gross profit for the quarter ended September 30, 2000 was
$9,155,000, representing a gross profit margin of 36.9%. This
compares with the overall gross profit and gross profit margin of
$6,727,000 or 41.8% for the quarter ended September 30, 1999. The
decrease in the overall gross profit margin of 4.9% was mainly
attributed to the combined effect of the increase in resin costs and
electronic component costs in the plastic and electronic division
respectively.
Selling, general and administrative expenses for the quarter ended
September 30, 2000 were $4,084,000, amounting to 16.5% of total net
sales, as compared to $3,277,000 or 20.3% of total net sales for the
quarter ended September 30, 1999.
As a result of the increase in net sales, operating income was
$5,071,000 for the quarter ended September 30, 2000, an increase of
$1,621,000 or 47.0% as compared with the corresponding quarter in the
prior year.
Minority interests represent the 49% minority interest in both the
electronics and metallic subsidiaries. The increase in minority
interests to $741,000 for the quarter ended September 30, 2000 from
$252,000 for the quarter ended September 30, 1999 reflects the
increased profits generated by the electronic and metallic business.
As a result of the above factors, net income was $4,011,000 for the
quarter ended September 30, 2000, an increase of $675,000 or 20.2%,
as compared to the quarter ended September 30, 1999 and net income as
a percentage of net sales decreased to 16.2% from 20.7%.
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DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SIX MONTHS
ENDED SEPTEMBER 30, 1999
----------------------------------------------------------
The Company's net sales for the six months ended September 30, 2000 were
$42,595,000, an increase of $14,404,000 or 51.1% as compared to corresponding
period in 1999. The significant increase in sales was mainly related to the
increase in sales of injection-molded plastic products and electronics and
metallic products of $6,370,000 and $8,034,000, respectively. This represented
increases of 34.6% and 81.9% respectively, as compared with the net sales in the
corresponding period in the prior year.
The increases in net sales in both operations were attributed to the substantial
increase in orders from its existing strong customer base together with the new
orders from new customers.
The gross profit for the six months ended September 30, 2000 was $15,410,000,
representing a gross profit margin of 36.2%. This compares with the overall
gross profit and gross profit margin of $11,319,000 or 40.2% for the six months
ended September 30, 1999. The decrease in the overall gross profit margin of
4.0% was mainly attributed to the combined effect of the increase in resin costs
and electronic component costs in the plastic and electronic division
respectively.
Selling, general and administrative expenses for the six months ended September
30, 2000 were $7,519,000, amounting to 17.7% of total net sales, as compared to
$5,944,000 or 21.1% of total net sales for the six months ended September 30,
1999.
As a result of the increase in net sales, operating income was $7,891,000 for
the six months ended September 30, 3000, an increase of $2,516,000 or 46.8% as
compared with the corresponding period in the prior year.
Minority interests represent the 49% minority interest in both the electronics
and metallic subsidiaries. The increase in minority interests to $829,000 for
the six months ended September 30, 2000 from $212,000 for the six months ended
September 30, 1999 reflects the increased profits generated by the electronic
and metallic business.
As a result of the above factors, net income was $6,768,000 for the six months
ended September 30, 2000, an increase of $1,319,000 or 24.2%, as compared to the
six months ended September 30, 1999 and net income as a percentage of net sales
decreased to 15.9% from 19.3%.
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DESWELL INDUSTRIES, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Traditionally, the Company has relied primarily upon internally
generated funds and short-term borrowings (including trade finance
facilities) to finance its operations and expansion, although capital
expenditure has been partly financed by long-term debt, including
capital leases.
As of September 30, 2000, the Company had a working capital surplus
of $47,343,000. This compares with a working capital surplus of
$44,727,000 at March 31, 2000. The increase in working capital was
mainly attributed to the substantial increase in net sales netting
off a dividend distribution of $2,942,000 and the capital investment
of $4,690,000 during the six months ended September 30, 2000.
The Company has generated sufficient funds from its operating
activities to finance its operations and there is little need for
external financing other than short-term borrowings which are used to
finance accounts receivable and are generally paid from cash
generated from operations. The Company has no outstanding short-term
borrowings and no long-term debt as of September 30, 2000.
As of September 30, 2000, the Company had in place general banking
facilities with two financial institutions aggregating approximately
$15,698,000. Such facilities, which are subject to annual review,
include overdrafts, letters of credit, import facilities, trust
receipt financing, inward bills financing as well as fixed loans. As
of September 30, 2000, the Company had ( i ) unused credit facilities
of $15,698,000 ( ii ) cash and cash equivalents of $23,498,000 and (
iii ) restricted cash of $2,058,000. The restricted cash of
$1,962,000 and leasehold land and buildings of $1,392,000 have been
pledged as collateral for those credit facilities. The Company also
had $96,000 pledged as deposit for customs duty in Dongguan, China.
The Company expects that working capital requirements and capital
additions will continue to be funded through a combination of
internally generated funds and existing facilities.
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