HONG KONG, Nov. 12, 2012 (GLOBE NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal 2013 second quarter ended September 30, 2012 -- reflecting a modest return to profitability, the benefits of continued streamlining and improved gross margin.
The company reported net income of $27,000, or $0.01 per diluted share, for its 2013 fiscal second quarter compared with a net loss of $364,000, or $0.09 per share, a year earlier. Net sales for the same period were $5.5 million compared with $5.6 million in fiscal 2012.
Net income for the six-month period was $156,000, or $0.04 per diluted share, compared with net income of $17,000, or $0.01 per diluted share, a year earlier. Net sales for the six-month period were $10.8 million compared with $12.1 million a year ago.
"Results for the quarter underscore the company's focus on and ability to streamline operations. Despite reduced year-over-year sales, gross profit margin increased to 21.9 percent from 19.0 percent for the quarter and 21.7 percent from 20.2 percent for the six-months period compared with the same periods a year earlier. In addition, we reduced the company's overhead by approximately 13.8 percent and 12.4 percent, respectively, for the quarter and six months without impacting future growth potential," said Roland Kohl, president and chief executive officer.
Kohl noted the sales decrease for the quarter and six months compared with the same periods a year ago was $86,000 and $1.28 million, respectively. The main reason for the sales decline, as previously announced, was due to the loss of mobile phone case business, which accounted for approximately $600,000 for the quarter a year earlier. Kohl emphasized that the company was able to replace approximately $514,000 of the lost mobile phone case sales for the quarter this year with sales increases from its other business segments, particularly due to gains from the company's lighting operation. The company recently announced new lighting business and expects solid gross profit and net income contributions once this new lighting fixture business is fully implemented.
"Despite continued worldwide economic weakness, our long-term business trends are encouraging and supported by the benefits of our ongoing streamlining initiatives that are expected to further strengthen profitability and the company's competitive position," Kohl said.
Net income for the second quarter benefitted from a favorable currency exchange gain of $41,000 compared with a small currency loss of $28,000 for the same period this year – reflecting fluctuations of the value of the RMB compared with the US dollars. "Since Highway Holdings' manufacturing operations have been changed to a wholly owned subsidiary that is registered in the PRC, the company had to exchange more of its cash into RMB. The company, therefore, is now also subject to currency fluctuations between the RMB and the U.S. dollar," Kohl said. For the fiscal 2013 six-month period, the company realized a small currency exchange loss of $34,000 compared with a currency exchange gain of $72,000 a year earlier. Since the company does not engage in currency exchange rate hedging, Highway Holdings will in the future continue to realize currency exchange gains and losses as a result of the fluctuation of currency exchange rates.
The company continues to focus on opportunities to offset the impact of higher labor wages in China and generally higher operating costs – including utilization of the company's proprietary automation equipment and robotic technology which it developed in conjunction with the company's joint venture German partner. Kohl noted that this automation JV has recently received some third-party orders and is showing promising progress in terms in producing and marketing similar automation equipment used by Highway Holdings for other manufacturing companies based in China.
In addition, the company is preparing to move labor intensive work that cannot be economically automated to neighboring lower-labor cost countries. "We are committed to providing our customers with the lowest-cost manufacturing services possible, but without sacrificing quality or service," Kohl said.
Kohl highlighted the company's strong balance sheet with cash and cash equivalents and restricted cash of $6.5 million, or approximately $1.73 per diluted share -- exceeding all of its combined liabilities by $2.9 million. He added that the company's financial position remains solid despite the two dividend distributions made during the last six-month period.
Current liabilities at September 30, 2012 totaled $3.4 million and current assets were $13.7 million. Total shareholders' equity at September 30, 2012 was $11.9 million, or $3.15 per diluted share, compared with $11.99 million, or $3.17 per diluted share, at March 31, 2012.
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 and finished products. Highway Holdings' administrative offices are located in Hong Kong and its manufacturing facilities are located in Shenzhen 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.
(Financial Tables Follow)
| HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES | ||||
| Consolidated Statement of Income | ||||
| (Dollars in thousands, except per share data) | ||||
| (Unaudited) | ||||
| Three Months Ended | Six Months Ended | |||
| September 30, | September 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Net sales | $ 5,507 | $ 5,593 | $10,779 | $12,056 |
| Cost of sales | 4,300 | 4,531 | 8,435 | 9,616 |
| Gross profit | 1,207 | 1,062 | 2,344 | 2,440 |
| Selling, general and administrative expenses | 1,182 | 1,372 | 2,097 | 2,394 |
| Operating income / (loss) | 25 | (310) | 247 | 46 |
| Non-operating items | ||||
| Interest expenses | (3) | (9) | (5) | (19) |
| Exchange gain (loss), net | 41 | (28) | (34) | 72 |
| Interest income | 4 | 1 | 5 | 2 |
| Other income | 0 | 8 | 46 | 9 |
| Total non-operating income (expenses) | 42 | (28) | 12 | 64 |
|
Net income/(loss) before income tax and non-controlling interest |
67 | (338) | 259 | 110 |
| Income taxes | (40) | (26) | (103) | (93) |
| Net Income/(loss) before non-controlling interests | 27 | (364) | 156 | 17 |
| Less: Net income attributable to non-controlling interests | 0 | 0 | 0 | 0 |
| Net Income/( Loss) attributable to Highway Holdings Limited | $27 | $ (364) | $ 156 | $ 17 |
| Net Income / (Loss) per share - basic and diluted | $0.01 | $(0.09) |
$0.04 |
$0.01 |
| Weighted average number of shares | ||||
| Basic | 3,778 | 3,777 | 3,778 | 3,777 |
| Diluted | 3,788 | 3,789 | 3,788 | 3,789 |
| HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES | ||
| Consolidated Balance Sheet | ||
| (In thousands, except per share data) | ||
| Sept 30 | March 31 | |
| 2012 | 2012 | |
| Current assets: | ||
| Cash and cash equivalents | $5,897 | $5,575 |
| Restricted cash | 643 | 643 |
| Accounts receivable, net of doubtful accounts | 3,655 | 3,724 |
| Inventories | 2,814 | 3.970 |
| Prepaid expenses and other current assets | 707 | 598 |
| Total current assets | 13,716 | 14,510 |
| Property, plant and equipment, (net) | 1,811 | 2,027 |
| Deposit for purchase of fixed asset | 0 | 42 |
| Total assets | $15,527 | $16,579 |
| Current liabilities: | ||
| Accounts payable | $2,139 | $2,547 |
| Current portion of long-term debt | 245 | 262 |
| Obligation under capital lease – current portion | 0 | 3 |
| Accrual payroll and employee benefits | 620 | 852 |
| Other liabilities and accrued expenses | 411 | 472 |
| Net Tax payable | 6 | 153 |
| Total current liabilities | 3,421 | 4,289 |
| Long term liabilities : | ||
| Long-term debt – net of current portion | 0 | 112 |
| Deferred income taxes | 180 | 180 |
| Total liabilities | 3,601 | 4,581 |
| Shareholders' equity: | ||
| Common shares, $0.01 par value | 38 | 38 |
| Additional paid-in capital | 11,340 | 11,340 |
| Retained earnings | 562 | 634 |
| Accumulated other comprehensive gain | 0 | 0 |
| Treasury shares, at cost – 5,049 shares as of September, 30, 2012; and March 31, 2012 respectively | (14) | (14) |
| Total Highway Holdings Limited shareholders' equity | 11,926 | 11,998 |
| Non-controlling interest | 0 | 0 |
| Total shareholders' equity | 11,926 | 11,998 |
| Total liabilities and shareholders' equity | $15,527 | $16,579 |