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Plastec Technologies, Ltd. - (OTCBB: PLTYF (ordinary shares), PLTWF (warrants), PLTEF (units)) (“Plastec” or the “Company”), an integrated plastic manufacturing services provider that operates in the People’s Republic of China, today reported unaudited financial results for the fiscal 2013 second quarter and six months ended June 30, 2013. See attached tables at the end of this release in Hong Kong dollars (HKD). All other amounts in this press release are presented in U.S. dollars (USD) with a conversion rate of US$1.0: HK$7.8.

FY 2013 Q2 Financial and Operating Highlights

(all comparisons to same period of prior year)

• Sales of $38.5 million, a decrease of 15.0% as a result of a reduction in lower margin product orders from existing customers
• Gross margin of 25.5%, compared to 11.2%, resulting primarily from streamlining of production costs during period and a more favorable product mix
• Adjusted EBITDA of $8.6 million, compared to $7.2 million
• Net income of $5.7 million, or $0.42 per diluted share based on 13.7 million diluted shares outstanding, compared to $1.8 million, or $0.13 per diluted share based on 14.3 million diluted shares outstanding

Fiscal 2013 Six-Month Financial and Operating Highlights

(all comparisons to same period of prior year)

• Sales of $76.3 million, a decrease of 3.0%
• Gross margin of 23.1%, compared to 10.4%
• Adjusted EBITDA of $15.7 million, compared to $12.8 million
• Net income of $7.3 million, or $0.53 per diluted share based on 13.7 million diluted shares outstanding, compared to $2.1 million, or $0.14 per diluted share based on 14.7 million diluted shares outstanding
• $10.1 million in cash generated from operations for the six months ended June 30, 2013, compared to $5.5 million

Balance Sheet Highlights (at June 30, 2013)

• $47.7 million in working capital at June 30, 2013, compared to $39.9 million at December 31, 2012
• No long-term debt

Management Comments

Mr. Kin Sun Sze-To, Chairman of Plastec, stated, “Plastec had another good quarter and a strong first half of 2013. Despite operating in a slow growth macro environment, we saw solid margin expansion due to streamlining of our production costs and focus on higher margin product orders from our customers. Although our total orders were down compared to the prior year, the Company improved its gross margin, operating income, and overall profitability during the period. I believe our entire organization has done a great job in terms of driving productivity in what continues to be a low growth environment.”

Mr. Sze-To continued, “Our outlook for the rest of the year remains unchanged from the end of the first quarter. Macro indicators are increasingly mixed, which makes predicting the timing of our customer orders more difficult. However, we continue to focus on balancing cost and growth and increasing customer satisfaction. We have been pleased with our low default rate and feel this is a primary driver of customer retention throughout our history. We also remain confident that our business will continue to provide us with profitable growth opportunities in other markets where our precision molding service would provide a solid value proposition for new customers.”

Selected Financial Highlights in USD ($ in millions, except number of shares and per share data)

3 months ended June 30, 2013

   

3 months ended June 30, 2012

   

Percentage

Change

      6 months ended June 30, 2013       6 months ended June 30, 2012      

Percentage

Change

Sales $38.5 $45.3 -15.0% $76.3 $78.7 -3.0% Cost of Revenues $28.7 $40.3 -28.8% $58.6 $70.5 -16.8% Gross Profit $9.8 $5.1 94.1% $17.6 $8.2 114.9% Gross Profit Ratio 25.5% 11.2% 23.1% 10.4%   Income from Operations $4.5 $2.3 98.6% $7.4 $2.9 157.3% Operating Margin 11.6% 5.0% 9.7% 3.7%   Net Income $5.7 $1.8 217.2% $7.3 $2.1 237.9% Net Margin 14.8% 4.0% 9.5% 2.7%  

Weighted Average Number

of Diluted Ordinary Shares

Outstanding

13,666,376 14,342,697 13,725,640 14,685,790 Diluted EPS $0.42 $0.13 230.0% $0.53 $0.14 272.7% Adjusted EBITDA* $8.6     $7.2     20.0%       $15.7       $12.8       23.0%

* Reconciliation Table At End of This Release

Balance Sheet Highlights in USD ($ in millions)   6/30/2013     12/31/2012  

Percentage

Change

(Unaudited) (Audited) Cash and Cash Equivalents $38.2 $39.7 -3.9% Total Current Assets $89.2 $89.8 -0.6% Total Assets $145.3 $151.2 -3.9% Working Capital $47.7 $39.9 19.5% Total Long-term Debt 0 0 Total Liabilities $41.6 $51.4 -19.1% Shareholders’ Equity $103.7 $99.8 3.9% Total Liabilities and Shareholders' Equity   $145.3     $151.2   -3.9%

2013 Second Quarter and First Half Financial Review

• Total sales for the three months ended June 30, 2013 decreased to $38.5 million from $45.3 million in the prior-year period. The decline in total sales was largely due to a reduction in lower margin product orders from Plastec’s customers, with many choosing to focus orders on new models. Total sales for the six months ended June 30, 2013 were $76.3 million, compared to $78.7 million in the first half of 2012.
• Despite lower sales during the quarter, the Company’s gross profit increased by 94.1% during the three month period ended June 30, 2013, and gross profit margin improved to 25.5% from 11.2% for the prior year period. The increase in gross profit and margin was due to a number of factors: a focus on new models from existing customers, which typically carry a much higher margin than second generation orders; a reduction in costs of revenues resulting from the Company’s efforts to further streamline its manufacturing process; and difficult economic conditions in the prior year period. For the six months ended June 30, 2013, the Company’s gross profit was $17.6 million, or 23.1% of revenues, compared to $8.2 million, or 10.4% of revenues, in the prior year period.
• Income from operations was $4.5 million, or 11.6% of revenues, during the three months ended June 30, 2013, compared to $2.3 million, or 5.0%, in the prior-year period. This was largely due to increased gross profit during the period, offset by higher selling, general and administrative expenses as a result of increased salary and allowances for supervisory and administration staff during the period. For the first half of 2013, the Company reported income from operations of $7.4 million, or 9.7%, compared to $2.9 million, or 3.7%, during the first half of 2012.
• Adjusted EBITDA for the three months ended June 30, 2013 was $8.6 million, compared to $7.2 million in the prior-year period. For the first half of 2013, adjusted EBITDA was 15.7 million, compared to $12.8 million in the first half of 2012.
• Net income for the three months ended June 30, 2013 was $5.7 million, or $0.42 per share based on approximately 13.7 million weighted average diluted shares outstanding, compared to $1.8 million, or $0.13 per share based on approximately 14.3 million weighted average diluted shares, in the prior-year period. The Company recorded a tax credit of approximately $1.3 million in the second quarter ended June 30, 2013 compared to an income tax expense of approximately $0.4 million in the corresponding period in the prior year. The tax credit resulted from disposals of certain fixed assets associated with deferred tax liabilities that had to be eliminated and credited to the income statement. For the six months ended June 30, 2013, net income was $7.3 million, or $0.53 per share based on approximately 13.7 million weighted average diluted shares outstanding, compared to $2.1 million, or $0.14 per share based on approximately 14.7 million weighted average diluted shares, in the prior-year period.

Share Repurchase Update

In December 2012, the Company approved a twelve-month extension of its previously announced share repurchase plan through December 9, 2013, allowing Plastec to purchase up to $5 million of its ordinary shares in both open market and privately negotiated transactions at the discretion of the Company’s management and as market conditions allow. The Company also expanded the scope of the repurchase plan to include Plastec’s publicly-held warrants, with all other terms of the repurchase plan remaining unchanged. To date, the Company repurchased 758,775 shares and 80,000 warrants under its repurchase plan.

About Plastec

Originally founded in 1993 by Chairman and CEO, Mr. Kin Sun Sze-To, Plastec is an integrated plastic manufacturing services provider that operates in the People’s Republic of China through its wholly owned subsidiaries. With approximately 5,400 employees, Plastec provides precision plastic manufacturing services from mold design and fabrication, plastic injection manufacturing to secondary-process finishing, as well as parts assembly.

Forward Looking Statements

This press release contains “forward-looking statements.” These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

    For the 3-month

period ended June 30,

    For the 6-month

period ended June 30,

2013   2012 2013   2012 HK$   HK$ HK$   HK$     Revenues 300,381 353,510 595,067 613,643 Cost of revenues (223,637)   (313,966) (457,409)   (549,598) Gross profit 76,744 39,544 137,658 64,045   Operating expenses, net Selling, general and administrative expenses (41,781) (21,991) (79,725) (42,697) Other income 2,644 530 2,730 1,117 Gain/(loss) on disposal of property, plant and equipment

(2,705)

 

(511)

(2,772)

 

38

Total operating expenses, net (41,842)   (21,972) (79,767)   (41,542)   Income from operations 34,902 17,572 57,891 22,503   Interest income 54 49 105 94 Interest expense (290)   (554) (678)   (1,214) Income before income tax expense 34,666 17,067 57,318 21,383   Income tax expense 9,812   (3,044) (662)   (4,618) Net income 44,478 14,023 56,656 16,765   Other comprehensive income Foreign currency translation adjustment 979   - 2,297   119 Comprehensive income attributable to

Plastec Technologies, Ltd.

45,457

 

14,023

58,953

 

16,884

  Net income per share:   Weighted average number of ordinary shares 13,666,376   14,342,697 13,725,640   14,685,790   Weighted average number of diluted

ordinary shares

13,666,376

 

14,342,697

13,725,640

 

14,685,790

  Basic income per share

attributable to Plastec Technologies, Ltd.

HK$3.3

 

HK$1.0

HK$4.1

 

HK$1.1

  Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$3.3

 

HK$1.0

HK$4.1

 

HK$1.1

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED BALANCE SHEETS

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

      (Unaudited) (Audited)   June 30,2013 December 31,2012       HK$ HK$

ASSETS

Current assets Cash and cash equivalents 297,848 309,862

Trade receivables, net of allowances for doubtful accounts of

HK$nil, and HK$nil as of December 31, 2012 and June 30,

2013, respectively

251,316

257,299

Inventories 88,811 97,467 Deposits, prepayment and other receivables 58,160   35,471 Total current assets 696,135 700,099   Property, plant and equipment, net 400,379 440,383 Prepaid lease payments, net 22,943 23,719 Other assets 10,883 14,503 Deferred tax assets 2,732 - Intangible assets 438   438 Total assets 1,133,510   1,179,142    

LIABILITIES AND SHAREHOLDERS’ EQUITY

  Current liabilities Bank borrowings 54,975 96,892 Trade payables 134,219 151,436 Other payables and accruals 95,909 115,715 Tax payable 39,206   25,225 Total current liabilities 324,309 389,268   Deferred tax liabilities -   11,629 Total liabilities 324,309   400,897   Commitments and contingencies - -   Shareholders’ equity

Ordinary shares (US$0.001 par value; 100,000,000

authorized 14,292,228 and 13,598,128 shares issued and

outstanding as of December 31, 2012 and June 30, 2013,

respectively)

 

107

 

112

Additional paid-in capital 57,340 85,332 Accumulated other comprehensive income 16,821 14,524 Retained earnings 734,933   678,277 Total shareholders’ equity 809,201   778,245       Total liabilities and shareholders’ equity 1,133,510   1,179,142

PLASTEC TECHNOLOGIES, LTD.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

        For the 6-month

period ended June 30,

  2013   2012   HK$ HK$ Operating activities Net income 56,656 16,765 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 64,509 78,238 Loss/(gain) on disposal of property, plant and equipment 2,772 (38) Deferred tax credit (14,361) - Changes in operating assets and liabilities: Trade receivables 5,983 (82,937) Inventories 8,655 12,398 Deposits, prepayment and other receivables (22,690) (10,551) Trade payables (17,217) 9,865 Other payables and accruals (19,805) 14,487 Tax payables   13,981   4,945 Net cash provided by operating activities   78,483   43,172   Investing activities Purchase of property, plant and equipment (19,842) (32,352) Proceeds from disposal of property, plant and equipment 1,833 5,997 Deposits for purchase of property, plant and equipment   (353)   (10,883) Net cash used in investing activities   (18,362)   (37,238)   Financing activities Repurchases of shares and/or warrants (32,515) (2,840) Net repayment of bank borrowings (41,917) (10,204) Repayment of capital lease obligations   -   (1,423) Net cash used in financing activities   (74,432)   (14,467)     Net decrease in cash and cash equivalents (14,311) (8,533)   Effect of exchange rate changes on cash and cash equivalents 2,297 119   Cash and cash equivalents, beginning of period   309,862   187,072 Cash and cash equivalents, end of period   297,848   178,658   Supplementary disclosures of cash flow information: Interest paid, net   573   1,120 Income taxes paid/(refunded)   1,043   (327)

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)

      3 Months ended         6 Months ended June 30   June 30 June 30   June 30 2013   2012 2013   2012 HK$   HK$ HK$   HK$   Net Income (note) 44,539 14,004 56,698 15,610   Plus Interest expenses 290 554 678 1,214 Minus Interest incomes (54) (49) (105) (94) Plus Income tax expenses (9,812) 3,044 662 4,618         Income from operations 34,963 17,553 57,933 21,348   Plus Depreciation and Amortization 32,292 38,474 64,509 78,238               Adjusted EBITDA 67,255   56,027   122,442   99,586       Note: Excl. other incomes and gain/(loss) on disposals

This press release includes financial information (EBITDA) not derived in accordance with generally accepted accounting principles or international financial reporting standards. Plastec believes that the presentation of such financial information provides more useful information to investors as it indicates more clearly Plastec’s future performance. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization

Plastec Technologies, Ltd.HL Ning, Chief Financial Officerning@plastec.com.hkorEli D. Scher, Directoreli@plastec.com.hkorINVESTOR RELATIONS:The Equity Group Inc.Adam Prior, Senior Vice President212-836-9606aprior@equityny.comorKatherine Yao, Associatekyao@equityny.com