HONG KONG, Oct. 31, 2006 (PRIMEZONE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its second fiscal quarter ended September 30, 2006, reflecting both the improvement in operations as a result of the recently completed reorganization and business strategy revision, and contributions from the company's new tooling and metal operations located in Wuxi.
The results for the fiscal 2007 second quarter do not include any contributions derived from the company's acquisition on September 18, 2006 of Golden Bright Plastic Manufacturing, which will be reflected in the results commencing in the third fiscal quarter.
Net income for the fiscal 2007 second quarter was $188,000, or $0.05 per diluted share, compared with a net loss of $112,000, or $0.03 per share, during the same period last year. Net sales for the 2007 fiscal second quarter increased 8.4 percent to $7.4 million from $6.9 million a year earlier.
Net income for the six-month period increased 77 percent to $758,000 from $428,000 a year earlier. Results in the same period a year ago included a one-time $940,000 gain related to the sale of the company's rights to its Kienzle trademark. Net sales for the fiscal 2007 first half increased 9.7 percent to $14.7 million compared with $13.4 million a year ago.
"Results for the first half of fiscal 2007 highlight the company's success in offsetting the loss of approximately $1.6 million in sales due to the divestiture of most of the company's unprofitable clock, watch and camera businesses and the benefit of our strategic decision to curtail these business segments in fiscal 2006. Our year-to-date performance indicates that the company is on the right course by emphasizing its OEM operations. Metal, mechanical and electronic OEM net sales for the quarter represented approximately $13.6 million, or 92.1 percent of the company's total net sales, which underscores the company's successful transition away from non-core businesses to its profitable OEM manufacturing operations," said Roland Kohl, chief executive officer.
Gross profit as a percentage of sales for the second fiscal quarter of fiscal 2007 was 20 percent compared with 18 percent in the same period a year ago, due primarily to the shift from the very low margin clock, watch and camera businesses to higher margin OEM operations. Gross profit increased 21.8 percent to $1.5 million from $1.2 million last year, reflecting both increased sales and a focus on higher margin OEM business.
Selling, general and administrative expenses for the fiscal quarter declined by $154,000, or 11.02 percent, from the same period a year ago primarily due to the retrenchment of the company's German clock and watch marketing operations in the recent reorganization.
Kohl noted the company's balance sheet remains strong. Cash and cash equivalents were $6.3 million at September 30, 2006, compared with $6.4 million at fiscal year end, March 31, 2006, despite approximately $600,000 of additional purchases of fixed assets for new machinery and equipment and a $514,000 payment related to the company's Golden Bright Plastic Manufacturing acquisition in mid-September and dividend payments totaling $703,000. The total shareholders equity at September 30, 2006 was $12.35 million compared with $12.27 million at 2006 fiscal year end. The company's current ratio was 2.09:1 at September 30, 2006.
Kohl indicated that continuing increases in raw material costs during the past 18 months, particularly oil combined with rapid industry expansion throughout China, have had an inflationary effect on operating costs, such as transportation, labor and electricity. He added that these additional expenses are expected to have a short-term impact on Highway Holdings, as well as on the company's competitors. Because the company may not be able to immediately pass all of the cost increases through to its customers, future operating results may reflect the consequences of higher costs. However, over the longer term, the company is working with customers to address these higher expenses.
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 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.
(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,
-------- -------- -------- --------
2006 2005 2006 2005
-------- -------- -------- --------
Net sales $ 7,428 $ 6,855 14,723 13,418
Cost of sales 5,964 5,653 11,733 10,835
-------- -------- -------- --------
Gross profit 1,464 1,202 2,990 2,583
Selling, general and
administrative
expenses 1,243 1,397 2,430 2,736
Gain on sale
of industrial
property rights 0 0 0 (940)
-------- -------- -------- --------
Operating income 221 (195) 560 787
Non-operating items
Interest expenses (54) (27) (101) (56)
Exchange gain
(loss), net (22) (58) 226 (456)
Interest income 35 13 81 23
Other income/
(expense) 8 155 18 160
-------- -------- -------- --------
Total non-operating
income (expenses) (33) 83 224 (329)
Net income/(loss)
before income tax 188 (112) 784 458
Income taxes 0 0 26 30
-------- -------- -------- --------
Net income/(loss) $ 188 $ (112) $ 758 $ 428
======== ======== ======== ========
Earning per share
- basic $ 0.05 ($ 0.03) $ 0.21 $ 0.13
======== ======== ======== ========
Weighted average number
of shares - basic 3,611 3,302 3,611 3,302
======== ======== ======== ========
Earning per share
- diluted $ 0.03 ($ 0.03) $ 0.21 $ 0.12
======== ======== ======== ========
Weighted average
number of shares
- diluted 3,611 3,455 3,611 3,455
======== ======== ======== ========
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except per share data)
September 30, March 31,
2006 2006
-------- --------
(Unaudited)
Current assets
Cash and cash equivalents $ 6,262 $ 6,384
Restricted cash 965 965
Accounts receivable, net
of doubtful accounts 4,386 3,789
Inventories 4,247 4,118
Short term investment 306 300
Prepaid expenses and other
current assets 745 546
-------- --------
Total current assets 16,911 16,102
Property, plant and
equipment, net 3,314 2,787
Investment and advance
in affiliate 516 2
-------- --------
Total assets $ 20,741 $ 18,891
======== ========
Current liabilities:
Accounts payable $ 3,630 $ 2,498
Short-term borrowing 2,613 2,015
Current portion of
long-term debt 419 481
Accrued mould charges 281 246
Accrual payroll and
employee benefits 358 292
Income tax payable 26 0
Other liabilities and
accrued expenses 761 610
-------- --------
Total current
liabilities 8,088 6,142
-------- --------
Long-term liabilities:
Long-term debt 143 322
Deferred income taxes 153 153
Shareholders' equity:
Common shares, $0.01 par
value, authorized
20,000,000 shares 35 35
Additional paid-in
capital 10,256 10,245
Retained earnings 2,187 2,133
Accumulated other
comprehensive income (68) (86)
Treasury shares,
at cost-37,800 shares (53) (53)
-------- --------
Total shareholders'
equity 12,357 12,274
-------- --------
Total liabilities and
shareholders' equity $ 20,741 $ 18,891
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