HONG KONG, Nov. 5, 2013 (GLOBE NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal 2014 second quarter ended September 30, 2013 -- reflecting sales growth, gross margin improvement and higher net income.
Net income for the fiscal 2014 second quarter increased to $153,000, or $0.04 per diluted share, from net income of $27,000, or $0.01 per diluted share, a year earlier. Net sales for the same period climbed 6.3 percent to $5.9 million from $5.5 million in the same period a year earlier.
Net income for the six-month period increased 94.2 percent to $303,000, or $0.08 per diluted share, from net income of $156,000, or $0.04 per diluted share, a year earlier. Net sales for the six-month period increased 8.79 percent to $11.7 million from $10.8 million a year ago.
"Results for the quarter reflect organic sales growth, supported by ongoing streamlining initiatives and a focus on addressing labor cost increases and other related issues in China," said Roland Kohl, chairman, president and chief executive officer of Highway Holdings.
He noted results for the past two quarters were impacted by direct and indirect costs and expenses of approximately $100,000 associated with supporting and upgrading the assembly operation of the company's subcontractor in Myanmar. Kohl added that the company has commenced negotiations to acquire a majority interest in the Myanmar operation from the local current subcontractors. Kohl emphasized this potential investment has been enabled by recent changes to business laws in Myanmar concerning foreign direct investment and participation in local companies. However, Highway Holdings' investment in the Myanmar facility still is subject to central government approval, the timing of which is unknown.
Gross profit for the fiscal 2014 second quarter increased to $1.4 million from $1.2 million a year ago due to increased net sales and increased gross margins. Gross profit as a percentage of sales for the same period was 24 percent compared with 22 percent a year earlier. Gross profit for the fiscal 2014 six-month period increased to $2.6 million from $2.3 million a year ago, while gross profit as a percentage of sales increased to 23 percent from 22 percent in the same period in fiscal 2013.
Kohl said he is optimistic about the company's long-term sales and earnings growth opportunities, supported by current and new business trends and the anticipated transfer of much of the company's labor-intensive assembly business to Myanmar. "We anticipate that our overall manufacturing costs and expenses will be greatly reduced in the future once most of the company's labor intensive assembly work has been transferred to this lower-cost facility," Kohl said.
Net income for the second quarter was impacted by an unfavorable currency exchange loss of $27,000 compared with an exchange gain of $41,000 for the same period last year – reflecting a weakening U.S. dollar. For the fiscal 2014 six-month period, the company realized a reduced currency exchange loss of $24,000 compared with a currency exchange loss of $34,000 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.
Kohl highlighted the company's strong balance sheet, with cash and cash equivalents and restricted cash of $4.7 million, or approximately $1.24 per diluted share, exceeding all of its short- and long-term liabilities by $1.4 million. He noted that the company's cash position would have been significantly higher without Chinese customs laws requiring custom deposit payments, representing a current aggregate cash amount of approximately $1.4 million, associated with the company's import contracts for raw materials. These cash deposits are included in "Prepaid expenses and other current assets" on the balance sheet.
Current liabilities at September 30, 2013 totaled $3.3 million and current assets were $13.8 million. Total shareholders' equity at September 30, 2013 was $12.2 million, or $3.22 per diluted share, compared with $12.01 million, or $3.17 per diluted share, at March 31, 2013.
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 September 30, |
Six Months Ended September 30, |
|||
| 2013 | 2012 | 2013 | 2012 | |
| Net sales | $5,854 | $5,507 | $11,726 | $10,799 |
| Cost of sales | 4,461 | 4,300 | 9,083 | 8,435 |
| Gross profit | 1,393 | 1,207 | 2,643 | 2,344 |
| Selling, general and administrative expenses | 1,188 | 1,182 | 2,213 | 2,097 |
| Operating income | 205 | 25 | 430 | 247 |
| Non-operating items | ||||
| Interest expenses | -- | (3) | (1) | (5) |
| Exchange gain /(loss), net | (27) | 41 | (24) | (34) |
| Interest income | 5 | 4 | 9 | 5 |
| Other income/(expenses) | (1) | 0 | (1) | 46 |
| Total non-operating income/(expenses) | (23) | 42 | (17) | 12 |
| Net income before income tax and non-controlling interests | 182 | 67 | 413 | 259 |
| Income taxes | (30) | (40) | (111) | (103) |
| Net Income before non-controlling interests | 152 | 27 | 302 | 156 |
| Add: Net Loss attributable to non-controlling interests | 1 | 0 | 1 | 0 |
| Net Income attributable to Highway Holdings Limited | $153 | $27 | $303 | $156 |
| Net Income per share - basic and diluted | $0.04 | $0.01 | $0.08 | $0.04 |
| Weighted average number of shares | ||||
| Basic | 3,778 | 3,778 | 3,778 | 3,778 |
| Diluted | 3,788 | 3,788 | 3,788 | 3,788 |
| HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES | ||
| Consolidated Balance Sheet | ||
| (In thousands, except per share data) | ||
|
Sept 30 2013 |
March 31 2013 |
|
| Current assets: | ||
| Cash and cash equivalents | $4,057 | $4,634 |
| Restricted cash | 643 | 643 |
| Accounts receivable, net of doubtful accounts | 4,001 | 3,958 |
| Inventories | 3,091 | 2.957 |
| Amount due from an equity method investee | -- | 110 |
| Prepaid expenses and other current assets | 1,961 | 1,114 |
| Total current assets | 13,753 | 13,416 |
| Property, plant and equipment, (net) | 1,474 | 1,769 |
| Loan receiveables | 260 | 167 |
| Total assets | $15,487 | $15,352 |
| Current liabilities: | ||
| Accounts payable | $1,415 | $1,515 |
| Current portion of long-term debt | -- | 112 |
| Accrual payroll and employee benefits | 835 | 885 |
| Other liabilities and accrued expenses | 562 | 501 |
| Dividend payable | 151 | 114 |
| Net Tax payable | 253 | 158 |
| Total current liabilities | 3,216 | 3,285 |
| Long term liabilities: | ||
| Deferred income taxes | 59 | 59 |
| Total liabilities | 3,275 | 3,344 |
| Shareholders' equity: | ||
| Common shares, $0.01 par value | 38 | 38 |
| Additional paid-in capital | 11,340 | 11,340 |
| Retained earnings | 779 | 628 |
| Accumulated other comprehensive income | 64 | 16 |
| Treasury shares, at cost – 5,049 shares as of September, 30, 2013; and March 31, 2013 respectively | (14) | (14) |
| Total Highway Holdings Limited shareholders' equity | 12,207 | 12,008 |
| Non-controlling interest | 5 | 0 |
| Total shareholders' equity | 12,212 | 12,008 |
| Total liabilities and shareholders' equity | $15,487 | $15,352 |