Highway Holdings Limited (Nasdaq: HIHO) today reported
results for its fiscal third quarter and nine months ended December
31, 2019 -- reflecting increased sales and profitability.
Net sales for the fiscal 2020 third quarter increased 22 percent
to $3.6 million from $2.9 million a year ago. For the same period,
net income increased sharply to $318,000, or $0.08 per share, from
a loss of $305,000, or $0.08 per share, in the same quarter a year
earlier.
For the nine months, net sales were $9.6 million compared with
$10.5 million a year ago. For the same period, the company reported
net income of $123,000, or $0.03 per diluted share, compared with a
net loss of $444,000, or $0.12 per share, a year earlier.
“Results for the quarter benefited from the company’s multi-year
investments in Myanmar, and management’s strategic focus on
reducing the company’s higher manufacturing costs. As a result,
these lower manufacturing costs allowed us to maintain our margin
targets and create favorable economics for our customers to attract
business, which contributed, we believe, to our customers’
increased sales activity and our increased orders for the quarter,”
said Roland Kohl, chairman, president and chief executive officer
of Highway Holdings.
Kohl noted that the recent coronavirus outbreak and the
country-wide shut down of factories across China to contain the
spread of the virus will impact the company’s manufacturing
facility in Shenzhen, China, as well as its supply chain.
“Operations at our facilities in Shenzhen are currently halted, and
we aren’t sure when we will be able to resume full operations. It
is difficult to predict the long-term impact, though a short-term
impact to our company and customers is to be expected. Fortunately,
the company’s increasing reliance on our operations in Myanmar,
which already produces more than half of our monthly sales volume,
is a strategic benefit and we remain optimistic about the company’s
long-term prospects,” Kohl said.
Gross margin as a percentage of sales for the three months ended
December 31, 2019 increased to 33.7 percent from 28.7 percent a
year earlier, and gross margin as a percentage of sales for the
nine months increased to 29.1 percent from 26.2 percent last
year.
Selling, general and administrative expenses decreased for the
quarter by $287,000, and also declined by $477,000 for the nine
months on a year-over-year basis, despite the company’s continued
additional expenses to support its Myanmar operation with technical
and managerial personnel from the company’s Hong Kong and Chinese
operations.
“The continued relocation of much of our business to Myanmar is
resulting in lower-work load requirements for our operations in
China. Consequently, we anticipate redundancies in our work force
in China, which will lead to substantial severance expense, which
has been accrued. While we do not expect these severance expenses
to impact our bottom-line results, these payments will somewhat
reduce our cash position,” Kohl said.
Net income for the fiscal third quarter reflects a currency
exchange gain of $17,000 compared with a currency exchange loss of
$56,000 a year ago. The company reported a $112,000 currency
exchange gain for the fiscal 2020 nine months compared with a
$21,000 currency exchange loss a year earlier -- mainly due to the
weakening of the RMB and Kyat. The company does not engage in
currency exchange rate hedging, and the fluctuations in the
exchange rate of the RMB and Kyat are expected to affect the
company’s future results.
Kohl noted the company’s balance sheet remains strong, despite a
decrease in cash. The company’s total cash position at December 31,
2019 decreased to approximately $8.5 million, or approximately $2.2
per diluted share, from $8.8 million at March 31, 2019 --
reflecting an increase in inventory levels during the transition of
operations from China to Myanmar, while maintaining order fills to
customers.
The company’s current ratio was 2.5:1 at December 31, 2019, and
the company's total cash exceeded all current and long-term
liabilities combined by $2.6 million.
Separately, the company reported that it has entered into a new
three-year lease for a portion of the existing Shenzhen, China
facilities. Under the new lease, which becomes effective on March
1, 2020 and continues until February 28, 2023, the company will
lease a total of approximately 15,200 square meters of space
compared with its current lease of approximately 24,400 square
meters of factory space and dormitories located in Shenzhen. The
reduced space requirements reflect the company’s relocation of most
of its labor-intensive manufacturing and assembly operations to its
facility in Yangon, Myanmar. The company also reported that it has
renewed the leases of its executive offices in Hong Kong. The Hong
Kong office leases, which will expire in March 2020, have been
extended for three years on terms substantially similar to the
existing lease terms.
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 office is 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.
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,
2019
2018
2019
2018
Net sales
$3,590
$2,950
$9,630
$10,495
Cost of sales
2,379
2,104
6,828
7,741
Gross profit
1,211
846
2,802
2,754
Selling, general and administrative
expenses
875
1,162
2,801
3,278
Operating income/(loss)
336
(316
)
1
(524
)
Non-operating items
Exchange gain /(loss), net
17
(56
)
112
(21
)
Interest income
12
10
42
17
Gain on disposal of asset
14
-
17
28
Other income
0
2
1
8
Total non-operating income/ (expenses)
43
(44
)
172
32
Net income/(loss) before income tax and
non-controlling interests
379
(360
)
173
(492
)
Income taxes
(60
)
-
(60
)
-
Net income/(loss) before non-controlling
interests
319
(360
)
113
(492
)
Less: net gain/(loss) attributable to
non-controlling interests
1
(55
)
(10
)
(48
)
Net income/(loss) attributable to Highway
Holdings Limited’s shareholders
$318
($305
)
$123
($444
)
Net income/(loss) per share - basic and
diluted
$0.08
($0.08
)
$0.03
($0.12
)
Weighted average number of shares
outstanding
Basic
3,977
3,801
3,895
3,801
Diluted
3,977
3,801
3,895
3,801
HIGHWAY HOLDINGS LIMITED AND
SUBSIDIARIES
Consolidated Balance
Sheet
(In thousands, except per share
data)
(Unaudited)
December 31
March 31
2019
2019
Current assets:
Cash and cash equivalents
$8,542
$8,827
Accounts receivable, net of doubtful
accounts
2,483
2,264
Inventories
2,327
1,539
Prepaid expenses and other current
assets
502
722
Operating leases
199
-
Total current assets
14,053
13,352
Property, plant and equipment, (net)
890
886
Operating Lease
1,157
-
Long-term deposits
54
66
Long-term loan receivable
95
75
Long-term prepayment
299
-
Long-term rental prepayment
-
871
Total assets
$16,548
$15,250
Current
liabilities:
Accounts payable
$1,211
$1,161
Other liabilities and accrued expenses
3,273
2,989
Lease liability
193
-
Income tax payable
625
602
Dividend payable
329
329
Total current liabilities
5,631
5,081
Long term
liabilities :
Lease liability
249
-
Deferred income taxes
32
32
Total liabilities
5,912
5,113
Shareholders’
equity:
Common shares, $0.01 par value
39
38
Additional paid-in capital
11,712
11,370
Retained earnings/( Deficit)
(1,111
)
(1,233
)
Accumulated other comprehensive
(loss)/income
(29
)
(35
)
Treasury shares, at cost – 5,049 shares as
of December 31, 2019; and March 31, 2019 respectively
(14
)
(14
)
Non-controlling interest
39
11
Total Highway Holdings Limited
shareholders’ equity
10,636
10,137
Total liabilities and shareholders’
equity
$16,548
$15,250
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200218005274/en/
Gary S. Maier Maier & Company, Inc. (310) 471-1288
Highway (NASDAQ:HIHO)
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