HONG KONG, Aug. 17, 2009 (GLOBE NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal first quarter ended June 30, 2009, reflecting the impact of global economic conditions on the company's major European customers and new pricing policies.
Net sales for the fiscal 2010 first quarter were $4.6 million compared with $9.3 million during the same period a year earlier - a period that benefited from an inflated order backlog due to a fiscal 2008 fourth quarter labor slowdown.
The company reported a net loss for the fiscal 2010 first quarter of $136,000, or $0.04 per share, compared with net income of $287,000, or $0.08 per diluted share, last year.
Gross profit as a percentage of sales for the first fiscal quarter of fiscal 2010 was 16 percent compared with 21 percent in the same period a year ago, reflecting the impact of sales volume and lower overhead absorption.
"It appeared early in the quarter that the global recession was having only a modest impact on our business. Unfortunately, some of our European customers were impacted late in the economic cycle -- thereby reducing our fiscal first quarter performance. However, while the fiscal second quarter also has been slow to ramp up, business inquiries from new and existing customers started to accelerate within the last week. These trends that are very encouraging and offer hope for a near-term recovery," said Roland Kohl, president and chief executive officer.
He noted that the decrease in net sales for the fiscal 2010 first quarter was amplified by the company's recently enacted pricing policy (as previously reported) in which changes in the cost of certain raw materials are passed through to the company's customers. "As a result of this new pricing policy, a decrease or increase in the cost of raw materials can have a positive or negative impact on net sales -- even if the same number of units are manufactured and sold. During the quarter ended June 30, 2009, the inventory of the much higher priced raw materials was used up and the cost of many of the used raw materials dropped sharply, thereby substantially decreasing net sales," Kohl said.
"Despite our optimism at fiscal year-end that our major European customers would be spared the full-impact of the global recession, the company from the beginning of the downturn initiated measures to weather the storm and to prepare the company to take advantage of future opportunities," Kohl emphasized. He noted that the company elected to retain its skilled and experienced staff during the downturn in order to be well-prepared for the expected recovery and new business opportunities. "This higher overhead relative to the company's sharply reduced sales in the fiscal first quarter obviously impacted the company's operating performance. Nonetheless, we regard this as a short-term investment with long-term benefits," Kohl added.
Selling, general and administrative expense for the fiscal quarter decreased by $440,000 or 27 percent, from the same period a year ago -- primarily due to a focus on streamlining costs and increased utilization of automation in its manufacturing process. However, selling, general and administrative expense as a percentage of sales for the first fiscal quarter of fiscal 2010 was 25.4 percent compared with 17.3 percent in the same period a year ago, due to lower net sales.
The company realized a $281,000 currency exchange gain during the fiscal quarter ended June 30, 2009 compared with an $8,000 currency exchange loss during the same period last year due to the strengthening value of the euro compared to the U.S. dollar.
Kohl highlighted the company's solid financial position, with cash equivalents, and restricted cash of $6.98 million. At June 30, 2009, the company had working capital of $8.9 million. Total shareholders' equity at June 30, 2009 was $11.3 million compared with $11.4 million as of 31.March 2009. The company's current ratio was 3.14:1 at June 30, 2009.
As noted above, the company reacted to the current economic recession early on and took precautious steps to weather the current economic downturn. "The goal of our strong actions was to provide a buffer to ride out the recessionary cycle, without losing sight of the company's long-term strategy," Kohl said. He emphasized that these actions included reducing the company's inventory levels (turning the inventory into cash); further increasing its collection of accounts receivable; and, reducing the company's variable and administrative costs. "As a result of these actions and despite the loss during the fiscal first quarter, the company at June 30, 2009 had more cash, cash equivalents and restricted cash than it did at the beginning of the fiscal quarter ($6.98 million on June 30, 2009 compared to $6.84 million on March 31, 2009), and inventory levels and outstanding receivables were both significantly reduced," Kohl said. As a result, he noted, over half of the company's current asset value as of June 31, 2009 consisted of cash, cash equivalents and restricted cash.
Kohl indicated that he believes that the company's current cash position, combined with its reduced operating expenses, provides the company with an adequate financial position to overcome detrimental operational periods during this recession, while still positioning the company to take immediate advantage of the anticipated rebound in business orders when the economy recovers.
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 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
-----------------------
2009 2008
-------- --------
Net sales $ 4,615 $ 9,347
Cost of sales 3,872 7,402
-------- --------
Gross profit 743 1,945
Selling, general and
administrative expenses 1,173 1,613
-------- --------
Operating (loss) / income (430) 332
Non-operating items
Interest expenses (18) (40)
Exchange gain / (loss), net 281 (8)
Interest income 4 11
Other income 10 15
-------- --------
Total non-operating income
(expenses) 277 (22)
Net (loss) / income before income
tax and noncontrolling interests (153) 310
Income taxes 0 39
-------- --------
Net (Loss) / Income (153) 271
Less: Net income (loss)
attributable to noncontrolling
interest 17 16
-------- --------
Net (Loss) / Income attributable
to Highway Holdings Limited $ (136) $ 287
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Net (Loss) / Income attributable
to Highway Holdings Limited $ (0.04) $ 0.08
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Weighted average number of shares
Basic 3,747 3,734
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Diluted 3,747 3,734
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HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except per share data)
June 30 March 31
2009 2009
-------- ---------
Current assets:
Cash and cash equivalents $ 5,949 $ 5,809
Restricted cash 1,028 1,028
Accounts receivable, net of
doubtful accounts 2,040 3,426
Inventories 3,496 4,010
Prepaid expenses and other
current assets 590 672
-------- ---------
Total current assets 13,103 14,945
-------- ---------
Property, plant and equipment,
(net) 2,739 2,840
Investment in affiliates 2 2
Intangible assets, (net) 20 24
-------- ---------
Total assets $15,864 $17,811
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Current liabilities:
Accounts payable $ 1,467 $ 2,166
Short-term borrowing 951 1,850
Current portion of long-term
debt 262 259
Accrual payroll and employee
benefits 399 373
Other liabilities and accrued
expenses 1,097 1,257
-------- ---------
Total current liabilities 4,176 5,905
-------- ---------
Long-term debt - net of current
portion 228 294
Deferred income taxes 163 163
-------- ---------
Total liabilities 4,567 6,362
-------- ---------
Shareholders' equity:
Common shares, $0.01 par value 37 37
Additional paid-in capital 11,224 11,224
Retained earnings 20 154
Accumulated other comprehensive
loss (7) (6)
Treasury shares, at cost -
37,800 shares as of March 31,
2009; and June 30, 2009
respectively (53) (53)
-------- ---------
Total Highway Holdings
Limited shareholders' equity 11,221 11,356
-------- ---------
Noncontrolling Interest 76 93
-------- ---------
Total shareholders' equity 11,297 11,449
-------- ---------
Total liabilities and
shareholders' equity $15,864 $17,811
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