HONG KONG, Jan. 28, 2013 (GLOBE NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal third quarter ended December 31, 2012 -– reflecting net income and margin improvement for the nine-month period.
Net income for the fiscal 2013 third quarter was $18,000, or $0.01 per diluted share, compared with $75,000, or $0.02 per diluted share, in the third quarter a year earlier. Net sales for the same period were $5.6 million compared with $7.3 million a year ago.
Net income for the nine-month period of fiscal 2013 increased 89 percent to $174,000, or $0.05 per diluted share, compared with $92,000, or $0.02 per diluted share, a year earlier. Net sales for the nine months were $16.4 million compared with $19.4 million in the comparable period a year earlier.
"Despite reduced year-over-year sales and continued increases in labor and other costs in China, gross margin for the quarter and nine months improved slightly due to further streamlining initiatives and improved product mix. The sales reduction in the fiscal 2013 third quarter compared with the same period a year earlier was due entirely to the loss of low margin mobile phone case business.
"Excluding the lost sales from the mobile phone case business, net sales on a year-over-year comparison were essentially flat, which suggests that business overall has stabilized and the company is poised to regain momentum," said Roland Kohl, chairman, president and chief executive officer of Highway Holdings.
Gross profit margin for the three- and nine-month periods ended December 31, 2012 increased to 22.2 percent and 21.9 percent, respectively, compared with 18.2 percent and 19.5 percent, respectively, a year earlier. Gross profit margin increased, in part, due to the termination of the low-margin mobile phone case business, which negatively impacted gross margins last year. Kohl also noted that management remains focused on further streamlining initiatives to offset escalating overhead costs in China without sacrificing quality and future business development. Operating income for the three-month period ended December 31, 2012 was $8,000 compared with $6,000 in the prior year. Operating income for the nine months was $255,000 compared with $52,000 a year earlier.
Kohl noted that the company is presently in discussions with some of its major customers for substantial price increases and/or authorization to outsource certain labor intensive assembly work to a lower labor-cost region in Asia. He indicated that the relocation of certain assembly services to a neighboring country should be an attractive alternative to higher pricing to customers. "The initial response from our customers indicates support for utilizing a lower-cost country, and we anticipate positive feedback with regard to quality and service utilizing this manufacturing option once the operation fully ramps up. We also expect that our ability to once again offer high quality manufacturing services at low costs will greatly enhance our sales growth and profitability, particularly in the new fiscal year," Kohl said.
Selling, general and administrative expenses were reduced by $88,000 and $385,000 for the three- and nine-month periods, due to the lower turnover. Selling, general and administrative costs as a percentage of net sales were slightly higher in both the three- and nine-month periods ended December 31, 2012 -- reflecting the impact of decreased sales turnover, increased staff salaries due to the inflationary situation and continued higher operating cost in China.
Fluctuating currency exchange rates affected the company's net income for the nine-month period ended December 31, 2012. During the nine-month period in 2012, the company reported a $26,000 currency exchange loss compared with a $78,000 exchange gain in 2011.
Kohl noted the company's balance sheet remains strong. The company's total cash and restricted cash position at December 31, 2012 was reduced by only approximately $267,000 compared with fiscal year end at March 31, 2012, despite aggregate dividend payments of $341,000, or $0.09 per diluted share since March 2012, and unexpected custom deposit payments of approximately $150,000. The company's cash position also benefited from the repurchase of certain mobile phone case-related inventory by Highway Holdings' former customer.
The company's current ratio was 4:1 at December 31, 2012. The total cash and restricted cash exceeded all current and long term liabilities combined by $2.4 million.
Kohl emphasized that the company is continuing its efforts to further upgrade Highway Holdings' facilities in China, while reducing the overall size of the operation to improve efficiency through advanced production methods and manufacturing automation.
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 | Nine Months Ended | |||
| December 31, | December 31, | |||
| 2012 | 2011 | 2012 | 2011 | |
| Net sales |
$5,619 |
$7,338 |
$16,398 | $19,394 |
| Cost of sales | 4,369 | 6,002 | 12,804 | 15,618 |
| Gross profit |
1,250 |
1,336 |
3,594 | 3,776 |
| Selling, general and administrative expenses | 1,242 | 1,330 | 3,339 | 3,724 |
| Operating income | 8 | 6 | 255 | 52 |
| Non-operating items | ||||
| Interest expenses | (2) | (4) | (7) | (23) |
| Exchange gain (loss), net | 8 | 6 | (26) | 78 |
| Interest income | 2 | 1 | 7 | 3 |
| Other income | 4 | 33 | 50 | 42 |
| Total non-operating income | 12 | 36 | 24 | 100 |
| Net income before income tax and non-controlling Interest | 20 | 42 | 279 | 152 |
| Income taxes | (2) | 33 | (105) | (60) |
| Net Income before non-controlling interest | 18 | 75 | 174 | 92 |
| Less: Net income attributable to non-controlling interest | 0 | 0 | 0 | 0 |
| Net income attributable to Highway Holdings Limited shareholders |
$18 |
$75 |
$174 | $92 |
| Net Income per share – basic and diluted | $0.01 | $0.02 | $0.05 | $0.02 |
| Weight 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) | ||
| Dec 31 | March 31 | |
| 2012 | 2012 | |
| Current assets: | ||
| Cash and cash equivalents | $5,308 | $5,575 |
| Restricted cash | 643 | 643 |
| Accounts receivable, net of doubtful accounts | 4,120 | 3,724 |
| Inventories | 2,628 | 3,970 |
| Prepaid expenses and other current assets | 841 | 598 |
| Total current assets | 13,540 | 14,510 |
| Property, plant and equipment, (net) | 1,856 | 2,027 |
| Deposit for purchase of property, plant and equipment | 0 | 42 |
| Total assets | $15,396 | $16,579 |
| Current liabilities: | ||
| Accounts payable | $1,824 | $2,547 |
| Current portion of long-term debt | 178 | 262 |
| Obligation under capital lease – current portion | 0 | 3 |
| Accrual payroll and employee benefits | 694 | 852 |
| Other liabilities and accrued expenses | 507 | 472 |
| Net tax payable | 182 | 153 |
| Total current liabilities | 3,385 | 4,289 |
| Long term liabilities : | ||
| Long-term debt – net of current portion | 0 | 112 |
| Deferred income taxes | 180 | 180 |
| Total liabilities | 3,565 | 4,581 |
| Shareholders' equity: | ||
| Common shares, $0.01 par value | 38 | 38 |
| Additional paid-in capital | 11,340 | 11,340 |
| Retained earnings | 467 | 634 |
| Treasury shares, at cost – 5,049 shares as of December, 31, 2012; and March 31, 2012 respectively | (14) | (14) |
| Total Highway Holdings Limited shareholders' equity | 11,831 | 11,998 |
| Non-controlling interest | 0 | 0 |
| Total shareholders' equity | 11,831 | 11,998 |
| Total liabilities and shareholders' equity | $15,396 | $16,579 |