HONG KONG, Feb. 2, 2015 (GLOBE NEWSWIRE) -- Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal third quarter ended December 31, 2014 -- reflecting increased profitability for both the quarter and nine-month period.
Net income for the fiscal 2015 third quarter increased to $361,000, or $0.10 per diluted share, from $149,000, or $0.04 per diluted share, in the same quarter a year earlier. Net sales for the same period increased to $6.0 million from $5.8 million a year ago, despite the previously announced planned phase out of certain low margin business that was essentially completed during the quarter.
Net income for the nine-month period of fiscal 2015 more than doubled to $989,000, or $0.26 per diluted share, from $451,000, or $0.12 per diluted share, a year earlier. Net sales for the nine months were $17.5 million, approximately equal to sales in the comparable period a year earlier.
Gross profit margin for the three- and nine-month periods ended December 31, 2014 increased to 24.7 percent and 24.2 percent, respectively, compared with 22.6 percent and 22.6 percent, respectively, a year earlier. Gross profit and net income increased due to ongoing streamlining efforts, improvements in efficiency and price increases to customers, which included increased prices for the low margin business, which has now been phased out.
Operating income for the three-month period ended December 31, 2014 was $458,000 compared with $132,000 in the prior year, as a result of increased net sales and higher gross margins. Operating income for the nine months almost doubled to $1,077,000 from $563,000 a year earlier.
"Results for the quarter reflect better pricing and, as noted above, a previously announced strategy to phase out low-margin, or unprofitable, business. This phase out has been completed and we are diligently focused on organic growth and new business opportunities to offset the low-margin sales," said Roland Kohl, chairman, president and chief executive officer.
Kohl emphasized the company has further increased its marketing efforts to gain new business by highlighting the company's quality manufacturing and other value-added services to potential customers. "These initiatives, while still developing, are particularly important for our future success and the emerging utilization of Myanmar, which offers high quality and lower-cost advantages for assembly work.
He noted that despite certain cost and pricing advantages of the company's Myanmar operation, most of the company's business activities are still in China – although the company is continuing efforts to shift its labor intensive assembly business to Myanmar. "An ongoing key challenge, therefore, is to balance the highly inflationary environment in China and Hong Kong, including higher wages for employees, with customer pricing expectations," Kohl added.
Currency exchange rates negatively affected the company's net income for the nine-month period ended December 31, 2014. The company reported a $52,000 currency exchange loss compared with a $28,000 exchange gain in fiscal 2014 -- mainly due to the weakening of the RMB and Euro currencies at December month ended.
Kohl noted the company's balance sheet remains very strong. The company's total cash position at December 31, 2014 was $8.7 million, or approximately $2.29 per share compared with $6.06 million at March 31, 2014, despite several dividend payments since April 2014. The phase out of certain low margin business resulted in the monetization of certain inventories, which translated into a higher cash position. The company's current ratio was 3.7:1 at December 31, 2014. The total cash exceeded all current and long term liabilities combined by $4.7 million.
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 and Yangon, Myanmar.
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, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net sales | $6,006 | $5,816 | $17,486 | $17,543 |
| Cost of sales | 4,524 | 4,503 | 13,262 | 13,586 |
| Gross profit | 1,482 | 1,313 | 4,224 | 3,957 |
| Selling, general and administrative expenses | 1,024 | 1,181 | 3,147 | 3,394 |
| Operating income | 458 | 132 | 1,077 | 563 |
| Non-operating items | ||||
| Interest expenses | -- | -- | -- | 1 |
| Exchange gain (loss), net | (40) | 53 | (52) | 28 |
| Interest income | 3 | 4 | 11 | 13 |
| Gain/(Loss) on disposal of Asset | -- | -- | 110 | -- |
| Other income/(expenses) | 2 | 48 | 2 | 45 |
| Total non-operating income | (35) | 105 | 71 | 87 |
| Share of profits/ (loss) of equity investees | 1 | -- | 7 | -- |
| Net income before income tax and non-controlling Interest | 424 | 237 | 1,155 | 650 |
| Income taxes | 63 | 89 | 167 | 200 |
| Net Income before non-controlling interest | 361 | 148 | 988 | 450 |
| Add : Net income attributable to non-controlling interest | -- | 1 | 1 | 1 |
| Net income attributable to Highway Holdings Limited shareholders | $361 | $149 | $989 | $451 |
| Net Income per share – basic and diluted | $0.10 | $0.04 | $0.26 | $0.12 |
| Weight average number of shares | ||||
| Basic | 3,788 | 3,778 | 3,788 | 3,778 |
| Diluted | 3,804 | 3,788 | 3,804 | 3,788 |
| HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES | ||
| Consolidated Balance Sheet | ||
| (In thousands, except per share data) | ||
| Dec 31 | March 31 | |
| 2014 | 2014 | |
| Current assets: | ||
| Cash and cash equivalents | $8,699 | $5,416 |
| Restricted cash | -- | 643 |
| Accounts receivable, net of doubtful accounts | 3,340 | 3,157 |
| Inventories | 2,042 | 3,700 |
| Investment in associate companies | 32 | -- |
| Prepaid expenses and other current assets | 698 | 1,044 |
| Total current assets | 14,811 | 13,960 |
| Property, plant and equipment, (net) | 986 | 1,213 |
| Loan receivables and long term deposit | 603 | 603 |
| Total assets | $16,400 | $15,776 |
| Current liabilities: | ||
| Accounts payable | $1,446 | $1,577 |
| Accrual payroll and employee benefits | 1,654 | 1,191 |
| Other liabilities and accrued expenses | 455 | 539 |
| Net Tax payable | 399 | 279 |
| Total current liabilities | 3,954 | 3,586 |
| Long term liabilities : | ||
| Deferred income taxes | 44 | 44 |
| Total liabilities | 3,998 | 3,630 |
| Shareholders' equity: | ||
| Common shares, $0.01 par value | 38 | 38 |
| Additional paid-in capital | 11,369 | 11,340 |
| Retained earnings | 1,002 | 770 |
| Accumulated other comprehensive income | 2 | 7 |
| Treasury shares, at cost – 5,049 shares as of December, 31, 2014; and March 31, 2014 respectively | (14) | (14) |
| Total Highway Holdings Limited shareholders' equity | 12,397 | 12,141 |
| Non-controlling interest | 5 | 5 |
| Total shareholders' equity | 12,402 | 12,146 |
| Total liabilities and shareholders' equity | $16,400 | $15,776 |