HONG KONG, June 30, 2008 (PRIME NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal fourth quarter and year ended March 31, 2008, reflecting the impact of labor unrest in China in preceding quarters associated with new government regulations concerning labor benefits and entitlements, overtime work reductions and workers' compensation claims.
Net sales for the fiscal fourth quarter were $7.8 million compared with $7.9 million a year earlier. For the same period, the company reported a net loss of $1.3 million, or $0.35 per share, compared with a net loss of $442,000, $0.13 per share, a year ago.
Net sales for fiscal year 2008 increased 5.4 percent to $33.2 million from $31.4 million in fiscal 2007, due to an $889,000 increase in sales derived from the company's OEM metal/plastic product business and a $1,268,000 increase in OEM electric product sales. The company reported a net loss for fiscal 2008 of $1.9 million, or $0.50 per share, compared with net income of $594,000, or $0.16 per diluted share, a year earlier. Highway Holdings' metal/plastic and electric products constitute the company's largest operations, representing approximately 96 percent of its net sales.
"Fiscal 2008 was a challenging period for the company. Nonetheless, we were able to achieve an increase in net sales on a year-over-year basis and an order backlog of approximately $5.0 million. As we commence a new fiscal year, the company's business opportunities are strong -- and potentially enhanced by weaker competitors not being able to survive the turmoil during the past year. We are optimistic that we will be able to maintain a stable workforce, manage increases in energy and raw material costs and regain the momentum," said Roland Kohl, president and chief executive officer.
The decrease in both the company's gross profits and in its gross profits as a percentage of sales reflects the significant increases in both the company's cost of labor and the cost of raw materials. Despite a $1,695,000 increase in net sales, the company's gross profit decreased to $5,074,000 in fiscal 2008. The company's gross profits as a percentage of its net sales decreased to 15.3 percent in fiscal 2008 from 19.8 percent fiscal 2007. In addition to increased labor and energy costs, the company paid $188,000 and established a reserve of $510,000 for potential labor claims awaiting decision by Chinese courts -- all of which impacted the company's cost of goods sold in fiscal 2008. During fiscal 2008, the cost of most raw materials also increased significantly, including significant steel, plastic and component price increases. The rapid rise in raw material costs combined with increased labor and energy costs inhibited the company's ability to pass these increases through to its customers in a timely manner -- resulting in lower gross margins and reduced gross profit in fiscal 2008. In addition, during fiscal 2008, the RMB currency increased substantially in value compared with the U.S. dollar. The company has adjusted its pricing for new orders to take into account the new higher prices and other manufacturing costs, and therefore expects that its gross margins will increase during the current fiscal year ending March 31, 2009. Selling, general and administrative expenses for fiscal 2008 increased by $1,501,000, or 25.7 percent, compared with fiscal 2007. The primary factors include (1) substantial increases in professional fees, including payments to is auditors and attorneys; (2) the additional general and administrative expenses attributable to the newly acquired Golden Bright operations (Golden Bright was acquired during fiscal 2007 and, therefore, only approximately one-half year's expenses were included in last fiscal year's expenses); (3) increased charges from local governmental agencies; (4) increased payroll expenses of its staff in China; (5) increased transportation expenses; (6) a rise in bad debt expenses; and (7) a significant loss of business at the company's Golden Bright operations due to labor strikes and worker slowdowns -- resulting in operating losses due to insufficient business turnover to cover minimum expenses to operate this factory.
The company's interest expenses decreased slightly in fiscal 2008 from $242,000 in fiscal 2007 to $225,000 in fiscal 2008 due to the decrease in interest rates. However, the company's interest income in fiscal 2008 also decreased by $61,000 due to the decrease in the interest rates. As in fiscal 2007, the company in fiscal 2008 received income from currency exchange gains. The currency exchange gains in both fiscal 2007 and 2008 were the result of the increase in the value of the euro compared to the U.S. dollar, which increased the value of payments the company received in Euros from its sales in Europe. Sales to European customers who paid in Euros represented approximately 18 percent of the company's net sales in fiscal 2008 and 20 percent in fiscal 2007. Since the company does not undertake any currency hedging transactions, its financial results will be affected by the future fluctuations of currencies. The company does, however, have agreements with certain of its European customers that limit the risk of currency fluctuations.
Despite the losses incurred by the company during the past fiscal year, as of March 31, 2008 the company had current assets of $16,790,000, working capital of $7,556,000, and long-term debt, net of the current portion, of only $522,000.
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 light fixtures, LED lights, radio chimes and other electronic products. Highway Holdings is headquartered in Hong Kong and operates four 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 Year End
(Unaudited) (Audited)
March 31 March 31
2008 2007 2008 2007
----------------- -------------------
Net sales $7,771 $7,946 $33,164 $31,469
Cost of sales (7,012) (6,517) (28,090) (25,233)
----------------- -------------------
Gross profit 759 1,429 5,074 6,236
Selling, general and
administrative expenses (2,354) (1,825) (7,351) (5,850)
----------------- -------------------
Operating Income (loss) (1,595) (396) (2,277) 386
Non-operating items
Interest expense (44) (73) (225) (242)
Exchange gain (loss), net 107 (26) 283 245
Interest income 18 32 100 161
Other income 10 37 60 92
Gain on disposal of partial
interest in a subsidiary 111 -- 111 --
Gain on disposal of
investment securities 2 -- 2 --
----------------- -------------------
Total non-operating income
(expenses) 204 (30) 331 256
Net income (loss) before
income tax and minority
interests (1,391) (426) (1,946) 642
Income taxes (9) (16) (28) (48)
----------------- -------------------
Income (loss) before
minority interests (1,400) (442) (1,974) 594
Minority Interests 53 -- 53 --
----------------- -------------------
Net income (loss) ($1,347) ($442) $(1,921) $594
================= ===================
Earnings (loss) per share
- basic ($0.35) ($0.13) $ (0.50) $ 0.16
----------------- -------------------
Weight average number of
shares - basic 3,810 3,636 3,810 3,636
================= ===================
Earnings (loss) per share
- diluted ($0.35) ($0.13) $ (0.50) $ 0.16
----------------- -------------------
Weight average number of
shares - diluted 3,810 3,636 3,810 3,690
================= ===================
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except per share data)
March 31 March 31
2008 2007
--------------------
Current assets:
Cash and cash equivalents $ 3,889 $ 5,299
Restricted cash 1,671 1,221
Accounts receivable, net of doubtful accounts 4,766 4,742
Inventories 5,775 6,104
Short term Investment -- 316
Prepaid expenses and other current assets 689 680
--------------------
Total current assets 16,790 18,362
--------------------
Property, plant and equipment, (net) 3,646 3,980
Investment in affiliates 2 2
Intangible assets, (net) 52 70
--------------------
Total assets 20,490 22,414
====================
Current liabilities:
Accounts payable $ 3,757 $ 3,990
Short-term borrowing 2,214 3,097
Current portion of long-term debt 311 478
Accrued mould charges 260 253
Accrual payroll and employee benefits 988 446
Other liabilities and accrued expenses 1,704 1,154
--------------------
Total current liabilities 9,234 9,418
--------------------
Long-term debt - net of current portion 522 655
Deferred income taxes 189 174
--------------------
Total liabilities 9,945 10,247
Minority Interest 151 --
Shareholders' equity:
Common shares, $0.01 par value, authorized
20,000,000 shares
3,779,746 shares as of March 31, 2007 and
3,819,900 shares As of March 31, 2008
respectively, issued and outstanding 38 38
Additional paid-in capital 11,562 11,304
Retained earnings (Accumulated Deficit) (614) 1,439
Accumulated other comprehensive loss (26) (48)
Subscription receivable - 128,534 shares in 2007 (-) (513)
Treasury shares, at cost - 37,800 shares in
2007; 166,334 shares in 2008 (566) (53)
--------------------
Total shareholders' equity 10,394 12,167
--------------------
--------------------
Total liabilities and shareholders' equity 20,490 22,414
====================