HONG KONG, Jan. 31, 2005 (PRIMEZONE) -- Highway Holdings Limited (Nasdaq:HIHO) today announced financial results for its 2005 fiscal third quarter ended December 31, 2004, reflecting sales strength from its metal components and clock divisions.
Net sales for the quarter increased 13 percent to $7.3 million compared with $6.5 million in fiscal 2004. Net income for the quarter was $116,000, or $0.03 per diluted share, compared with $214,000, or $0.07 per diluted share, a year ago.
For the nine-month period, net sales increased 6.5 percent to $19.9 million from $18.6 million a year earlier. Net income for the nine months of fiscal 2005 was $490,000 or $0.15 per diluted share, compared with $574,000, or $0.19 per diluted share, in fiscal 2004.
"Although net sales increased for the quarter and nine months, results for the third fiscal quarter were still impacted by substantial increases for raw materials and related services. We are working with our major customers to address the escalating raw material increases and have already imposed, and are continuing to impose, price increases, on lower-margin customers," said Roland Kohl, chairman and chief executive officer of Highway Holdings.
He added that metal prices have increased approximately 27 percent, with plastic material prices climbing 30 to 45 percent and transportation costs increasing by more than 20 percent since the company's fiscal year end in March 2004.
"While the increased material costs lowered our profitability for the quarter, the losses were mainly the result of restructuring expenses associated with the company's sales office in Germany, and by a strong decline in our camera business," Kohl said.
"While raw materials costs are certainly of concern, we are nonetheless encouraged by the recent commencement of original equipment manufacturing production of light fixtures for OSRAM GmbH, a subsidiary of Siemens AG (NYSE:SI), which had been delayed," Kohl said.
Kohl said the company's camera business continues to be weak, as digital cameras and mobile phones gain market share from lower-cost traditional photography products like single-use cameras. He added that Highway Holding's specialty under-water photography product sales are encouraging, but not enough to offset weakness in its other camera product lines. Kohl indicated that the company is seriously evaluating strategic options to stop the losses and address its camera business overall.
Sales of metal stamped parts and components for the third fiscal quarter of 2005 amounted to $5.2 million, an increase of $1.3 million, or 34.9 percent, over a year ago -- representing 70.8 percent of the company's total sales. Sales in the metal manufacturing operations reflect revenues generated from the previously announced orders from the company's larger OEM clients, such as OSRAM, Miele, Berger Lehr and KEM. In addition to being the largest segment of Highway Holdings' three business segments, metal manufacturing also provides the company with its largest gross margins. However, the recent increases in cost of materials offset the impact on the company's gross profit that otherwise would have been realized from a 34.9 percent increase in metal sales. As a result of the cost increases, gross profit for the third fiscal quarter remained unchanged, despite the significant increase in sales.
Clock and watch sales for the quarter increased by 30.8 percent to $1.5 million from $1.2 million last year, representing approximately 20.8 percent of total sales. Kohl noted that sales of clocks and watches were positively affected by the commencement of new OEM clock orders, as well as strong sales contributions from the company's restructured German sales office. "Despite a turnaround in sales from our German office, our German operations continue to operate at a heavy loss and management is focused on finalizing the restructuring and on bottom-line improvement," Kohl said.
As anticipated, sales for the camera unit decreased further in the fiscal third quarter to $613,000 from $1.5 million a year ago -- representing 8.4 percent of total sales compared with 22.6 percent a year ago.
Selling, general and administrative expenses for the third quarter increased to $1.4 million from $1.1 million a year ago. The increase of the selling, general and administrative expenses mainly reflects a primarily non-cash legal settlement expenses with the company's patent attorney associated with its camera patents and the concluded Fuji litigation, in addition to personnel costs at its German sales operation. The company does not expect any additional future costs associated with the Fuji lawsuit.
As a result of (i) price increases of raw material, (ii) price increases of oil and related components and services, and (iii) increased selling, general and administrative expenses, the company incurred a loss in its operations of $169,000 in the December 31, 2004, fiscal third quarter, compared with operating income of $76,000 during the same fiscal quarter last year. However, excluding the non-cash selling, general and administrative expenses, the company would have had operating income.
Kohl emphasized that the company's balance sheet remains very strong. At December 31, 2004, the company had working capital of $9.6 million compared with $8.8 million at March 31, 2004. Total shareholders' equity improved to $13.3 million from $12.8 million last year. The company's current ratio was 2.25:1 at December 31, 2004.
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. It also manufactures clocks, clock movements and watches for sale under the company's own Kienzle Uhren brand name, as well as for unaffiliated companies. Additionally, Highway Holdings manufactures or produces other finished products, including single-use and 35mm cameras and certain electronic products. Highway Holdings is headquartered in Hong Kong and operates manufacturing facilities in Shenzhen province of 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,
2004 2003 2004 2003
-------- -------- -------- --------
Net sales $ 7,309 $ 6,457 $ 19,861 $ 18,644
Cost of sales 6,111 5,259 16,080 15,179
-------- -------- -------- --------
Gross profit 1,198 1,198 3,781 3,465
Selling, general and
administrative expenses 1,367 1,122 3,634 3,101
-------- -------- -------- --------
Operating income (loss) (169) 76 147 364
Non-operating expense
Interest expenses (26) (13) (75) (54)
Exchange gain, net 308 214 430 321
Interest income 9 0 12 10
Other income 19 11 67 50
-------- -------- -------- --------
Total non-operating
income 310 212 434 327
Share of loss of
affiliate 0 0 (1) 0
Net income before taxes 141 288 580 691
Income taxes 25 74 90 116
-------- -------- -------- --------
Net income before
minority interest 116 214 490 575
Minority interest 0 0 0 1
-------- -------- -------- --------
Net income $ 116 $ 214 $ 490 $ 574
======== ======== ======== ========
Earning per share --
basic $ 0.04 $ 0.07 $ 0.15 $ 0.19
======== ======== ======== ========
Weighted average number
of shares -- basic 3,227 2,993 3,227 3,034
======== ======== ======== ========
Earning per share --
diluted $ 0.03 $ 0.07 $ 0.15 $ 0.18
======== ======== ======== ========
Weighted average number
of shares -- diluted 3,339 3,255 3,343 3,253
======== ======== ======== ========
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except per share data)
December 31 March 31
2004 2004
----------- -----------
(Unaudited)
Current assets
Cash and cash equivalents $ 4,673 $ 4,158
Restricted cash 965 965
Short term investment 298 309
Accounts receivable, net of
doubtful accounts 4,554 3,763
Inventories 6,080 4,394
Prepaid expenses and other
current assets 701 639
----------- -----------
Total current assets 17,271 14,228
Property, plant and equipment,
net 3,771 3,780
Investment and advance in
affiliate 7 7
Industrial property rights 590 673
----------- -----------
Total assets $ 21,639 $ 18,688
=========== ===========
Current liabilities:
Short-term borrowings $ 1,920 $ 1,933
Current portion of long-term
debt 350 173
Accounts payable 3,683 2,296
Accrual payroll and employee
benefits 394 321
Accrued professional fees 268 110
Other liabilities and accrued
expenses 903 543
Income tax payable 175 78
----------- -----------
Total current liabilities 7,693 5,454
----------- -----------
Long-term debt 495 212
Deferred income taxes 179 179
Minority interest 2 2
Shareholders' equity:
Common shares, $0.01 par value
Authorized, 20,000,000 shares;
issued 3,305,987 shares at
December 31, 2004;
outstanding shares at Dec
31, 2004: 3,268,187 33 31
Additional paid-in capital 9,458 9,035
Retained earnings 4,119 3,954
Accumulated other comprehensive
income (287) (126)
Treasury shares, at cost-37,800
shares at December 31, 2004 (53) (53)
----------- -----------
Total shareholders' equity 13,270 12,841
----------- -----------
Total liabilities and
shareholders' equity $ 21,639 $ 18,688
=========== ===========