--Company Profitable for Quarter and Full Year
Despite COVID-19 Impact--
Highway Holdings Limited (Nasdaq: HIHO) today reported
results for its fiscal fourth quarter and year ended March 31, 2020
– reflecting the impact of lower orders from certain customers
experiencing soft product demand and the impact of a four-week shut
down of the company’s factory in China due to the Chinese New Year
holiday and government-required coronavirus closures in January and
February.
Net sales for the fiscal 2020 fourth quarter were $2.9 million
compared with $3.8 million a year ago. Net income for the same
period was $563,000, or $0.14 per diluted share, compared with a
net loss of $186,000, or $0.05 per share, a year earlier.
Net sales for fiscal 2020 were $12.6 million compared with $14.3
million a year ago. Net income for fiscal 2020 was $686,000, or
$0.18 per diluted share, compared with a net loss of $630,000, or
$0.17 per share, a year earlier.
The sales decrease for fiscal 2020 noted above reflects sharply
reduced orders from two of the company’s major customers –
including a year-over-year sales reduction of approximately 30
percent from one customer alone. The decrease in orders from these
customers was due to a weaker demand for the products sold by those
customers.
“The company’s solid financial performance for the fourth
quarter and fiscal year reflects the recovery of business in the
second half of the year from our largest customer – partially
offsetting the sharp decrease in sales in first half of the fiscal
year. Our performance was also greatly enhanced by sharp
cost-cutting initiatives, a rental subsidy, and the reversal of
certain prior-year provisions. Sales in the fourth quarter would
have been better had our Shenzhen factory not been closed for four
weeks and the company substantially handicapped in month of March
2020 due to COVID-19,” said Roland Kohl, chairman, president and
chief executive officer of Highway Holdings.
“Despite the impact of the coronavirus crisis and its impact on
the worldwide economy and our business, we expect our financial
strength will carry us through and may become a competitive edge
and enable us to take advantage of new business opportunities
created by the expected realignment of the business environment. In
addition, the escalating trade war between the United States and
China should further enhance the appeal of our expanding
manufacturing capacity and capabilities in Myanmar. In short, while
cautious, we remain optimistic about the long-term future for our
business,” Kohl said.
Gross profit for the fiscal 2020 fourth quarter was $1.35
million compared with $826,000 a year ago. Gross profit as a
percentage of sales was 46 percent compared with 22 percent in
fiscal 2019.
Gross profit for fiscal 2020 was $4.2 million compared with $3.6
million a year earlier. Gross profit as a percentage of sales for
fiscal 2020 was 33 percent compared with 25 percent a year earlier.
This increase in the gross profit margin for the fourth quarter and
the full fiscal year was primarily due to three one-time items:
The company, due to the present situation, was able to partially
reverse certain of last year’s accounting provisions, such as
reserves for slow-moving inventory.
Kohl specifically highlighted the benefits of rental and utility
subsidies provided by the local Shenzhen government as a result of
the imposed COVID-19 restrictions and the required temporary
closure of Highway Holdings’ Shenzhen, China operations.
The cost of sales was further reduced by temporary rental income
for subleasing surplus factory space in China factory.
These government allowances and the reversal of some of last
year’s reserves lowered the company’s costs of sales, and thereby
improved the company’s gross margin. Excluding these one-time
events, the company’s gross margins increased slightly as
manufacturing and assembly operations transitioned from the
company’s facilities in China to its facilities in Myanmar. Due to
the increase in gross margin, the company’s gross profit increased
by 16.0 percent on a year-over-year basis, despite lower sales in
fiscal 2020.
Selling, general and administrative expenses decreased to
$605,000 from $1.0 million for the fiscal fourth quarter a year
ago. For the full fiscal year, selling general and administrative
expenses decreased to $3.4 million from $4.3 million last year --
reflecting sharp cost-cutting initiatives, temporary salary cuts
for management and reversal of last year’s staff obligation
provisions.
The company realized a currency exchange gain of $7,000 in
fiscal 2020 compared with a currency exchange loss of $8,000 a year
ago, mainly due to the weakening of the RMB. The company does not
undertake any currency hedging transactions.
Kohl noted the company’s balance sheet remains strong. Total
current assets at March 31, 2020 were $13.2 million, with working
capital of $8.2 million and a current ratio of 2.7:1. Total cash
was $8.8 million, or $2.26 per diluted share.
Kohl highlighted the company’s total equity of $10.9 million at
March 31, 2020 -- representing approximately $2.79 per diluted
share.
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 in Hong
Kong, with manufacturing and assembly facilities located in
Shenzhen in the People’s Republic of China and in Yangon,
Myanmar.
Except for the historical information contained herein, the
matters discussed in this press release are forward-looking
statements, including but not limited to the Company’s expectations
regarding COVID-19 and its impact on the Company and its
competitors, the Company’s ability to maintain lower costs at the
Myanmar facility, the effects of lower costs in Myanmar on customer
retention, the timing of future business, and the Company’s growth
prospects. These forward-looking statements involve numerous risks
and uncertainties, including 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. The forward-looking
statements are made only as of the date of this press release and
the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or
circumstance.
HIGHWAY HOLDINGS LIMITED AND
SUBSIDIARIES
Consolidated Statement of
Income
(Dollars in thousands, except per
share data)
Three Months Ended
Year Ended
March 31, (Unaudited)
March 31, (Audited)
2020
2019
2020
2019
Net sales
$
2,928
$
3,782
$
12,558
$
14,277
Cost of sales
1,577
2,956
8,405
10,697
Gross profit
1,351
826
4,153
3,580
Selling, general and administrative
expenses
605
1,057
3,406
4,335
Operating income/(loss)
746
(231
)
747
(755
)
Non-operating items
Exchange gain/(loss), net
(105
)
13
7
(8
)
Interest income
23
16
65
33
Gain/(Loss) on disposal of assets
(1
)
-
16
28
Other income
60
-
61
8
Total non-operating income /
(expenses)
(23
)
29
149
61
Share of profits (loss) of equity
investee
-
-
-
-
Net income/(loss) before income tax and
non-controlling Interest
723
(202
)
896
(694
)
Income taxes
(149
)
26
(209
)
26
Net income/(loss) before non-controlling
interests
574
(176
)
687
(668
)
Less: Net gain / (loss) attributable to
non-controlling Interests
11
10
1
(38
)
Net income/(loss) attributable to Highway
Holdings Limited shareholders
563
($
186
)
$
686
($
630
)
Net income/(loss) per share:
Basic
$
0.14
($
0.05
)
$
0.18
($
0.17
)
Diluted
$
0.14
($
0.05
)
$
0.18
($
0.17
)
Weighted average number of shares
outstanding:
Basic
3,910
3,802
3,910
3,802
Diluted
3,910
3,802
3,910
3,802
HIGHWAY HOLDINGS LIMITED AND
SUBSIDIARIES
Consolidated Balance
Sheet
(In thousands, except per share
data)
March 31,
March 31,
2020
2019
Current
assets:
Cash and cash equivalents
$
8,827
$
8,827
Accounts receivable, net of doubtful
accounts
2,008
2,264
Inventories
2,000
1,539
Prepaid expenses and other current
assets
388
722
Total current assets
13,223
13,352
Property, plant and equipment, (net)
878
886
Operating lease right-of-use assets
3,710
-
Long-term deposits
263
66
Long-term loan receivable
95
75
Long-term rental prepayment
-
871
Investments in equity method investees
-
-
Total assets
$
18,169
$
15,250
Current
liabilities:
Accounts payable
$
997
$
1,161
Operating lease liabilities, current
782
-
Accrual expenses and other liabilities
2,294
2,989
Income tax payable
564
602
Dividend payable
351
329
Total current liabilities
4,988
5,081
Long term
liabilities:
Operating lease liabilities,
non-current
2,034
-
Deferred income taxes
229
32
Total liabilities
7,251
5,113
Shareholders'
equity:
Preferred shares, $0.01 par value
-
-
Common shares, $0.01 par value
40
38
Additional paid-in capital
11,537
11,370
Accumulated deficit
(865
)
(1,233
)
Accumulated other comprehensive
(loss)/income
196
(35
)
Treasury shares, at cost – Nil and 5,049
shares as of March 31, 2020 and 2019, respectively
-
(14
)
Non-controlling interest
10
11
Total equity
10,918
10,137
Total liabilities and shareholders'
equity
$
18,169
$
15,250
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200818005390/en/
Gary S. Maier (310) 471-1288
Highway (NASDAQ:HIHO)
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