HONG KONG, Aug. 3, 2006 (PRIMEZONE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its first fiscal quarter ended June 30, 2006 -- reflecting the initial benefits of its divesture of non-core businesses completed in fiscal 2006.
Net income for the fiscal 2007 first quarter increased 5.6 percent to $570,000, or $0.16 per diluted share, from $540,000, or $0.16 per diluted share, last year -- which included a one-time $940,000 net gain related to the sale of a portion of the company's rights to its Kienzle trademark. Net sales for the 2007 fiscal first quarter increased 11.1 percent to $7.3 million from $6.6 million a year earlier.
"Our strategic divestiture initiatives over the past year have established a solid foundation for growth and profitability within the OEM sector. Results for the first fiscal quarter are particularly encouraging given the company's $400,000 loss a year ago before the one-time gain noted above and an 11 percent sales increase this quarter, despite the approximate $1.0 million loss of sales due to divestiture of the clock and camera businesses. We fully expect to now capitalize on the opportunities available to the company without the distractions and costs associated with non-core operations that impacted the company in recent years," said Roland Kohl, chairman and chief executive officer of Highway Holdings.
Metal, mechanical and electronic OEM net sales represented $6.74 million, or 92.39 percent of the company's total net sales, for the first fiscal quarter -- highlighting the company's successful strategy to concentrate on its core OEM operations. As anticipated, sales of clocks and watches declined to $423,000 from $860,000 -- representing current OEM customers. Sales of cameras also, as expected, declined to $132,000 from $711,000 in the same fiscal period a year earlier.
Gross profit as a percentage of sales for the first fiscal quarter of fiscal 2006 was 21 percent compared with 21 percent in the same period a year ago. Gross profit increased 10.5 percent to $1.53 million from $1.38 million last year, reflecting increased OEM sales and the elimination of watch and clock business not directly related to the company's watch and clock OEM business. The company noted that margins for the current fiscal quarter were impacted by: increases in the cost of raw materials, such as metal and plastic materials, which increased, from the same period a year ago, in the range of five to 20 percent; gasoline price increases of approximately 35 percent; increases in labor and facility costs; and, set-up expenses associated with the recent formation of a new metal company and tool-making operation located in Wuxi, China, approximately 160 kilometers west of Shanghai.
Selling, general and administrative expenses for the fiscal quarter declined by $152,000, or 11.35 percent, from the same period a year ago -- primarily due to the significant reduction of staff in Germany, as reported last quarter. The company cautioned that this trend is not necessarily indicative of future trends given planned strategic growth initiatives, such as operations in Wuxi, China, noted above, and other current and potential developments highlighted in the company's Form 20-F report for its fiscal year ended March 31, 2006.
Kohl noted the company's balance sheet remains strong. Cash and cash equivalents increased to $6.6 million at June 30, 2006, compared with $6.4 million at March 31, 2006, despite investments in fixed assets for new machinery and equipment. At June 30, 2006, the company had working capital of 10.2 million compared with $10.0 million at March 31, 2006. Total shareholders' equity at June 30, 2006, was $12.8 million compared with 12.3 million last year. The company's current ratio was 2.55:1 at June 30, 2006.
The company recently declared a cash dividend of $0.20 per share, payable August 10, 2006 to holders of record on July 28, 2006. This follows a $0.20 per share dividend paid on December 12, 2005 and August 15, 2005 -- representing a combined payout of $0.60 over a one-year period.
About Highway Holdings
Highway Holdings produces a wide variety of high-quality products for blue chip original equipment manufacturers -- from simple parts and components to sub-assemblies. It also manufactures finished products, such as LED Lights, radio chimes and other electronic products. Highway Holdings is headquartered in Hong Kong and operates three manufacturing facilities in the People's Republic of China.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements which involve risks and uncertainties, including but not limited to economic, competitive, governmental, political and technological factors affecting the company's revenues, operations, markets, products and prices, and other factors discussed in the company's various filings with the Securities and Exchange Commission, including without limitation, the company's annual reports on Form 20-F.
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Quarter Ended June 30, 2006 2005 ------- ------- Net sales $ 7,295 $ 6,563 Cost of sales 5,769 5,182 ------- ------- Gross profit 1,526 1,381 Selling, general and administrative expenses 1,187 1,339 Gain on sale of industrial property rights 0 (940) ------- ------- Operating income 339 982 Non-operating items Interest expenses (47) (29) Exchange gain (loss), net 248 (398) Interest income 46 10 Other income/(expense) 10 5 ------- ------- Total non-operating income (expenses) 257 (412) Net income before income tax 596 570 Income taxes 26 30 ------- ------- Net Income $ 570 $ 540 ======= ======= Earning per share -- basic $ 0.16 $ 0.16 ------- ------- Weighted average number of shares -- basic 3,539 3,302 ======= ======= Earning per share -- diluted $ 0.16 $ 0.16 ------- ------- Weighted average number of shares -- diluted 3,543 3,455 ======= ======= HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES Consolidated Balance Sheet (In thousands, except per share data) June 30, March 31 2006 2006 -------- -------- (Unaudited) Current assets Cash and cash equivalents $ 6,553 $ 6,384 Restricted cash 965 965 Short term investment 299 300 Accounts receivable, net of doubtful accounts 4,236 3,789 Inventories 3,970 4,118 Prepaid expenses and other current assets 799 546 -------- -------- Total current assets 16,822 16,102 Property, plant and equipment, net 3,008 2,787 Investment and advance in affiliate 2 2 -------- -------- Total assets $ 19,832 $ 18,891 ======== ======== Current liabilities: Accounts payable $ 3,243 $ 2,498 Short-term borrowings 1,482 2,015 Current portion of long-term debt 441 481 Accrual payroll and employee benefits 363 292 Accrued mould charges 213 246 Other liabilities and accrued expenses 820 610 Income tax payable 26 0 -------- -------- Total current liabilities 6,588 6,142 -------- -------- Long-term liabilities: Long-term debt 243 322 Deferred income taxes 153 153 Shareholders' equity: Common shares, $0.01 par value, authorized 20,000,000 shares 35 35 Additional paid-in capital 10,245 10,245 Retained earnings 2,703 2,133 Accumulated other comprehensive income (82) (86) Treasury shares, at cost-37,800 shares (53) (53) -------- -------- Total shareholders' equity 12,848 12,274 -------- -------- Total liabilities and shareholders' equity $ 19,832 $ 18,891 ======== ========