Highway Holdings Limited (Nasdaq: HIHO) today reported results for its fiscal 2020 second quarter and six-month period ended September 30, 2019.

Net sales for the fiscal 2020 second quarter were $3.2 million compared with $3.5 million a year earlier. Net loss for the same period was $94,000, or $0.02 per share, compared with net loss of $222,000, or $0.06 per share, a year earlier.

For the six-month period, net sales were $6.0 million compared with $7.5 million a year earlier. The company incurred a net loss of $196,000, or $0.05 per share, compared with a net loss of $139,000, or $0.04 per share, for the same period a year ago.

“Results for the quarter and first half of fiscal 2020 were affected by a reduction in orders from some of the company’s major customers, as previously reported. A sharp decline in demand for products sold by one of these customers was a major factor in our order softness, as well as by worldwide business dynamics -- specifically the ongoing trade war between the United States and China,” said Roland Kohl, chairman, president and chief executive officer.

He also noted that the company’s sales for the quarter and six months were impacted by price reductions provided to customers as an incentive to utilize the company’s newly expanded Myanmar operation. Kohl noted that approximately one-half of the company’s business is now being produced at its Myanmar manufacturing facility.

Kohl emphasized the company continues to focus on cost-reduction initiatives. Despite significant cost reductions, SG&A expenses were only modestly decreased for the reported periods due to costs associated with the transfer of business and equipment from the company’s China in factory to its Myanmar operation. These costs are expected to decline for the balance of the fiscal year, since the final phase of the equipment relocation is nearing completion. In addition, Kohl noted the company is also scaling back its operations in China to reflect its decreased utilization and the ramp up of production in the Myanmar factory. He added that the cost-savings initiatives will, however, be somewhat offset by additional expenses associated with training staff in Myanmar by the company’s Hong Kong-based managers and technicians, as well as its Chinese engineers.

Gross profit for the second quarter of fiscal 2020 was $845,000 compared with $864,000 a year ago. Gross profit as a percentage of sales for the same period was 26.4 percent compared with 24.7 percent a year earlier. Gross profit for the six-month period of fiscal 2020 was $1.6 million compared with $1.9 million a year ago. Gross profit as a percentage of sales for the same period was 26.3 percent compared with 25.3 percent a year earlier. “Gross profit for both the quarter and six months of 2020 is not truly representative of the company’s expected annualized financial performance due to the rapid changes and extraordinary costs associated with the relocation, aside from lower net sales and lower gross margins for both periods,” Kohl said.

Net loss for the second quarter reflects a currency exchange gain of $54,000 compared with a $2,000 currency exchange gain for the same period last year -- mainly due to weakening of RMB. For the fiscal 2020 six-month period, the company reported a currency exchange gain of $95,000 compared with a currency exchange gain of $35,000 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 due to the fluctuation of currency exchange rates.

Kohl noted the company’s balance sheet remains strong, with cash and cash equivalents in excess of $8.0 million, or approximately $2.08 per diluted share, exceeding all of its short- and long-term liabilities by approximately $2.0 million.

Current liabilities at September 30, 2019 totaled $5.8 million and current assets were $13.9 million. Total shareholders’ equity at September 30, 2019 was $10.3 million, or $2.67 per diluted share, compared with $10.1 million, or $2.7 per diluted share, at March 31, 2019.

About Highway Holdings Limited

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 in Yangon in 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.

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,

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

3,195

 

 

$

3,495

 

 

$

6,040

 

 

$

7,545

 

 

 

Cost of sales

 

2,350

 

 

 

2,631

 

 

 

4,449

 

 

 

5,637

 

 

 

Gross profit

 

845

 

 

 

864

 

 

 

1,591

 

 

 

1,908

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

1,014

 

 

 

1,115

 

 

 

1,926

 

 

 

2,116

 

 

 

Operating (loss)

 

(169

)

 

 

(251

)

 

 

(335

)

 

 

(208

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating items

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange gain /(loss), net

 

54

 

 

 

2

 

 

 

95

 

 

 

35

 

 

 

Interest income

 

19

 

 

 

5

 

 

 

29

 

 

 

7

 

 

Gain/(Loss) on disposal of Asset

 

2

 

 

 

-

 

 

 

3

 

 

 

28

 

 

 

Other income/(expenses)

 

-

 

 

 

-

 

 

 

1

 

 

 

6

 

 

 

Total non-operating income/ (expenses)

 

75

 

 

 

7

 

 

 

128

 

 

 

76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) before income tax and non-controlling interests

 

(94

)

 

 

(244

)

 

 

(207

)

 

 

(132

)

 

 

Income taxes

 

0

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

Net (loss) before non-controlling interests

 

(94

)

 

 

(212

)

 

 

(207

)

 

 

(132

)

 

 

Less: net gain/(loss) attributable to non-controlling interests

 

0

 

 

 

10

 

 

 

(11

)

 

 

7

 

 

 

Net income/(loss) attributable to Highway

Holdings Limited’s shareholders

 

 

 

(94

 

)

 

 

 

 

(222

 

)

 

 

 

 

(196

 

)

 

 

 

 

(139

 

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) per share – Basic

 

($

0.02

)

 

($

0.06

)

 

($

0.05

)

 

($

0.04

)

 

 

Net (loss) per share - Diluted

($

0.02

)

 

($

0.06

)

 

 

($

 

0.05

 

)

 

 

($

 

0.04

 

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

3,904

 

 

 

3,802

 

 

 

3,853

 

 

 

3,802

 

 

 

Diluted

 

 

 

3,904

 

 

 

 

 

 

3,802

 

 

 

 

 

 

3,853

 

 

 

 

 

 

3,802

 

 

 

 

HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES

Consolidated Balance Sheet

(Dollars in thousands, except per share data)

 

Sept 30

 

Mar 31

 

2019

 

2019

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

8,039

 

 

$

8,827

 

Accounts receivable, net of doubtful accounts

 

2,198

 

 

 

2,264

 

Inventories

 

2,220

 

 

 

1,539

 

Prepaid expenses and other current assets

 

930

 

 

 

722

 

Operating leases

 

476

 

 

 

-

 

Total current assets

 

13,863

 

 

 

13,352

 

 

 

 

 

Property, plant and equipment, (net)

 

876

 

 

 

886

 

Operating lease

 

1,157

 

 

 

-

 

Long-term deposits

 

66

 

 

 

66

 

Long-term loan receivable

 

75

 

 

 

75

 

Long-term prepayment

 

299

 

 

 

-

 

Long-term rental prepayment

 

-

 

 

 

871

 

Total assets

$

16,336

 

 

$

15,250

 

 

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

989

 

 

$

1,161

 

Other liabilities and accrued expenses

 

3,448

 

 

 

2,989

 

Lease liability

 

464

 

 

 

-

 

Income tax payable

 

556

 

 

 

602

 

Dividend payable

 

329

 

 

 

329

 

Total current liabilities

 

5,786

 

 

 

5,081

 

 

 

 

Long term liabilities:

 

 

 

Lease liability

 

243

 

 

 

-

 

Deferred income taxes

 

32

 

 

 

32

 

Total liabilities

 

6,061

 

 

 

5,113

 

 

 

 

 

Shareholders’ equity:

 

 

 

Common shares, $0.01 par value

 

39

 

 

 

38

 

Additional paid-in capital

 

11,712

 

 

 

11,370

 

Retained earnings / (Deficit)

 

(1,430

)

 

 

(1,233

)

Accumulated other comprehensive income/(loss)

 

(70

)

 

 

(35

)

Treasury shares, at cost – 5,049 shares as of September, 30, 2019; and March 31, 2019 respectively

 

(14

)

 

 

(14

)

Non-controlling interest

 

38

 

 

 

11

 

Total shareholders’ equity

 

10,275

 

 

 

10,137

 

 

 

 

 

Total liabilities and shareholders’ equity

$

16,336

 

 

$

15,250

 

 

Gary S. Maier (310) 471-1288

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