Deswell Industries Announces Fourth Quarter And Year-end Results

MACAO--(Business Wire)--
Deswell Industries, Inc. (NASDAQ: DSWL) today announced its financial results
for the fiscal fourth quarter and year ended March 31, 2009.

Net sales for the fourth quarter ended March 31, 2009 were $27.4 million, a
decrease of 13.2% compared to sales of $31.5 million for the same quarter ended
March 31, 2008, mainly due to the continuing decline in demand from the
professional audio and instrument equipment market which offset an increase in
business from the Company`s plastic segment. The Company reported operating
income in the fourth quarter of $0.21 million, compared to operating income of
$0.65 million for the same quarter of 2008. Net income for the fourth quarter
ended March 31, 2009 was $0.59 million compared to net income of $1.04 million
for the quarter ended March 31, 2008. Basic net income per share and diluted net
income per share for the quarter decreased to $0.04 and $0.04 respectively,
(based on 15,791,000 and 15,821,000 weighted average shares outstanding,
respectively) compared to $0.07 and $0.07 respectively, (based on 15,791,000 and
15,810,000 weighted average shares outstanding, respectively) for the quarter
ended March 31, 2008.

Total gross margin was 15.8% in the fourth quarter ended March 31, 2009 compared
to 16.0% in the same quarter last year. Gross profit in the plastic segment
decreased to 18.9% of net sales for the fourth quarter compared to 21.4% of net
sales for the same quarter of last year. The decreased gross margin in the
plastic segment was mainly the effect of an increase in material cost due to
increase in material usage as a result of change in customer mix, and 5.3%
appreciation in renminbi, as compared to the same quarter last year. Gross
margin in the electronic and metallic segment increased to 12.4% of net sales
for the fourth quarter ended March 31, 2009, compared to 11.4% of net sales for
the year-ago quarter. The increase in gross margin in the electronic and
metallic segment was mainly the result of a decrease in raw materials cost and
savings in labor cost due to headcount reduction.

Net sales for the year ended March 31, 2009 were $131.7 million, a decrease of
8.4%, compared to sales of $143.8 million for the corresponding period in 2008.
Operating income decreased to $0.75 million, compared to $8.7 million of
operating income for the fiscal year ended March 31, 2008. Net income decreased
to $1.20 million, compared to $8.86 million for the year ended March 31, 2008.
Basic and diluted net income per share for the year decreased to $0.08 and
$0.08, respectively (based on 15,791,000 and 15,805,000 weighted average shares
outstanding, respectively) compared to $0.57 and $0.57, respectively (based on
15,517,000 and 15,556,000 weighted average shares outstanding, respectively),
for the year ended March 31, 2008.

The Company's financial position remained strong at the end of the fourth
quarter of fiscal year 2008, with $23.1 million cash and cash equivalents at
March 31, 2009, compared to $22.7 million on March 31, 2008. Working capital
totaled $51.6 million as of March 31, 2009, versus $54.8 million as of March 31,
2008. Furthermore, the Company has no long-term or short-term borrowings as of
March 31, 2009.

Mr. Franki Tse, chief executive officer, commented, "Strong sales performance in
our plastic division was unfortunately offset by a decrease in sales in the
Pro-audio division. We remain focused on cost effectiveness and will continue to
tightly monitor expenses and overhead in order to maintain our highly cost
effective operation."

Mr. Tse continued, "There is no doubt that the world economic downturn has
affected our business. As an export-oriented manufacturing company based in
China, Deswell is inevitably affected by the worldwide business environment.
However, recently we have seen a slowing in the downturn and my communications
with and personal visits to many of our major customers as well as the numbers
of on-hand new projects, indicate a positive outlook. We believe that we will
stay healthy financially and that Deswell will weather the worldwide economic
decline and emerge stronger than many of our competitors in this region."

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 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. The Company`s customers
include N&J Company, Digidesign Inc., Vtech Telecommunications Ltd., Inter-Tel
Incorporated, Focusrite Audio Engineering, Ltd. .

To learn more about Deswell Industries, Inc., please visit the Company`s web
site 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 and metallic 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,
2009 2008
ASSETS (Unaudited) (Audited)

Current assets :
Cash and cash equivalents $ 23,134 $ 22,718
Marketable securities 100 116
Accounts receivable, net 22,227 21,397
Inventories 21,445 26,462
Prepaid expenses and other current assets 1,887 3,205
Income taxes receivable -- 3
Total current assets 68,793 73,901
Property, plant and equipment - net 67,551 65,885
Deferred income tax assets 746 230
Goodwill 392 391
Total assets $ 137,482 $ 140,407

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable $ 10,370 $ 12,527
Customer deposits and accrued expenses 6,100 5,994
Income taxes payable 705 629
Total current liabilities 17,175 19,150
Minority interests -- --

Shareholders' equity
Common stock
- authorized 30,000,000 shares; issued and outstanding
15,790,810 shares at March 31, 2009 and
15,790,810 shares at March 31, 2008 49,923 49,923
Additional paid-in capital 7,771 7,709
Accumulated other comprehensive income 5,316 3,734
Retained earnings 57,297 59,891
Total shareholders' equity 120,307 121,257
Total liabilities and shareholders' equity $ 137,482 $ 140,407

DESWELL INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(U.S. Dollars in Thousands, except per share data)

Quarter ended Year ended
March 31, March 31,
2009 2008 2009 2008
(Unaudited) (Unaudited) (Audited)
Net sales $ 27,357 $ 31,524 $ 131,738 $ 143,806
Cost of sales 23,028 26,474 111,570 117,373
Gross profit 4,329 5,050 20,168 26,433
Selling, general and administrative expenses 3,763 5,282 19,291 19,601
Other income/(expenses), net (347 ) 884 (132 ) 1,838
Operating income 219 652 745 8,670
Non-operating income/(expenses), net 20 21 168 521
239 673 913 9,191
Income taxes (350 ) (365 ) (282 ) 104
Income before minority interests 589 1,038 1,195 9,087
Minority interests -- -- -- 228
Net income 589 1,038 1,195 8,859

Other comprehensive income
Foreign currency translation adjustment -- 1,286 1,582 2,628
Comprehensive income 589 2,324 2,777 11,487

Net income per share (note 3)
Basic:
Net income per share $ 0.04 $ 0.07 $ 0.08 $ 0.57
Weighted average number of shares
outstanding (in thousands) 15,791 15,791 15,791 15,517

Diluted:
Net income per share $ 0.04 $ 0.07 $ 0.08 $ 0.57
Weighted average number of shares
outstanding (in thousands) 15,821 15,810 15,805 15,556

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John Nesbett/Jennifer Belodeau
203-972-9200

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