PLTWF Planet 13 Holdings Inc (PK)

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 third quarter and nine months ended September 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 Q3 Financial and Operating Highlights

(all comparisons to same period of prior year)

• Sales of $36.8 million, a decrease of 22.2% as a result of a reduction in lower margin product orders from existing customers
• Gross margin of 20.9%, compared to 16.1%, resulting primarily from streamlining of production costs during period and a more favorable product mix
• Adjusted EBITDA of $6.4 million, compared to $9.8 million
• Net income of $29,000, or $0.00 per diluted share based on 13.6 million diluted shares outstanding, compared to $4.4 million, or $0.31 per diluted share based on 14.3 million diluted shares outstanding

Fiscal 2013 Nine-Month Financial and Operating Highlights

(all comparisons to same period of prior year)

• Sales of $113.1 million, a decrease of 10.2%
• Gross margin of 22.4%, compared to 12.5%
• Adjusted EBITDA of $22.0 million, compared to $22.6 million
• Net income of $7.3 million, or $0.54 per diluted share based on 13.7 million diluted shares outstanding, compared to $6.6 million, or $0.46 per diluted share based on 14.5 million diluted shares outstanding
• $13.0 million in cash generated from operations for the nine months ended September 30, 2013, compared to $17.3 million

Balance Sheet Highlights (at September 30, 2013)

• $52.6 million in working capital at September 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, “We continue to focus our operations on higher margin product orders, concentrating our business on precision molding design and finishing services that provide a strong value proposition for customers. During this period, Plastec avoided lower margin product orders, which led to lower revenues. However, we were pleased to continue to report incremental margin improvement in the third quarter.”

Mr. Sze-To continued, “While our industry has encountered challenges from a slower macro environment, we feel that Plastec’s long-standing customer relationships and quality of service has allowed our Company to continue growing. We are always re-investing free cash flow in our assets to provide our customers with the latest technology and ability to perform a wide number of intricate designs with a low default. We have production facilities in Guangdong and Jiangsu Provinces, along with another in Thailand. These are located strategically next to our major customers, allowing our Company to provide just-in-time deliveries while also serving as a geographical advantage over potential competitors. We believe that these locations provide Plastec with the physical capacity to meet any increased demand in output.”

Selected Financial Highlights(USD$ in millions, except number of shares and per share data)(Results and percentages rounded to the nearest tenth)

  3 months ended Sept 30, 2013       3 months ended Sept 30, 2012    

Percentage

Change

      9 months ended Sept 30, 2013       9 months ended Sept 30, 2012    

Percentage

Change

  Sales $36.8 $47.3 -22.2% $113.1 $126.0 -10.2% Cost of Revenues $29.1 $39.7 -26.7% $87.7 $110.2 -20.4% Gross Profit $7.7 $7.6 1.3% $25.3 $15.8 60.1% Gross Profit Ratio 20.9% 16.1% 22.4% 12.5%   Income from Operations $0.5 $4.7 -89.4% $7.9 $7.6 3.9% Operating Margin 1.4% 9.9% 7.0% 6.0%   Net Income $0.03 $4.4 -99.3% $7.3 $6.6 10.6% Net Margin 0.1% 9.3% 6.5% 5.2%   Weighted Average Number of Diluted Shares Outstanding 13,594,107 14,292,228 13,681,314 14,498,320 Diluted EPS $0.00 $0.31 -100.0% $0.54 $0.46 17.4% Adjusted EBITDA* $6.4 $9.8 -34.7% $22.0 $22.6 -2.7%

* Reconciliation table at end of release

Balance Sheet Highlights (USD$ in Millions)  

9/30/2013

   

12/31/2012

  Percentage Change Cash and Cash Equivalents $39.4 $39.7 -0.8% Total Current Assets $91.9 $89.8 2.3% Total Assets $142.7 $151.2 -5.6% Working Capital $52.6 $39.9 31.8% Total Long-term Debt 0 0 Total Liabilities $39.3 $51.4 -23.5% Shareholders’ Equity $103.4 $99.8 3.6% Total Liabilities and Shareholders' Equity $142.7 $151.2 -5.6%

2013 Third Quarter and First Nine Month Financial Review

• Total sales for the three months ended September 30, 2013 decreased to $36.8 million from $47.3 million in the prior-year period. The decline in total sales was largely due to a reduction in lower margin product orders. Total sales for the nine months ended September 30, 2013 were $113.1 million, compared to $126.0 million in the first nine months of 2012.
• Despite lower sales during the quarter, the Company’s gross profit increased by 1.3% to $7.7 million during the three-month period ended September 30, 2013, and gross profit margin improved to 20.9% from 16.1% 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 reducing capacity where necessary. For the nine months ended September 30, 2013, the Company’s gross profit was $25.3 million, or 22.4% of revenues, compared to $15.8 million, or 12.5% of revenues, in the prior-year period.
• Income from operations was $0.5 million, or 1.4% of revenues, during the three months ended September 30, 2013, compared to $4.7 million, or 9.9%, in the prior-year period. The Company reported a loss of $1.7 million during the three-month period due to a write off of fixed assets, arising from its efforts in streamlining its manufacturing plants. For the first nine months of 2013, the Company reported income from operations of $7.9 million, or 7.0%, compared to $7.6 million, or 6.0%, during the first nine months of 2012.
• Adjusted EBITDA for the three months ended June 30, 2013 was $6.4 million, compared to $9.8 million in the prior-year period. For the first nine months of 2013, adjusted EBITDA was $22.0 million, compared to $22.6 million in the first nine months of 2012.
• Net income for the three months ended September 30, 2013 was $29,000, or $0.00 per share based on approximately 13.6 million weighted average diluted shares outstanding, compared to $4.4 million, or $0.31 per share based on approximately 14.3 million weighted average diluted shares, in the prior-year period. For the nine months ended September 30, 2013, net income was $7.3 million, or $0.54 per share based on approximately 13.7 million weighted average diluted shares outstanding, compared to $6.6 million, or $0.46 per share based on approximately 14.5 million weighted average diluted shares, in the prior-year period.

Share Repurchase Update

In September 2013, the Company announced the completion of its previously announced repurchase plan of up to $5 million of its ordinary shares and warrants, which was subject to expire on December 9, 2013. At the completion of the plan, Plastec had repurchased 832,765 shares and 85,000 warrants thereunder. The Company subsequently announced a new 12-month repurchase plan through September 25, 2014, allowing Plastec to purchase up to $5 million of its ordinary shares and warrants in both open market and privately negotiated transactions at the discretion of the Company’s management and as market conditions allow. As of the date of this press release, Plastec had repurchased 586,010 shares and 22,000 warrants under the current 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 over 5,000 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 AND COMPREHENSIVE INCOME (Unaudited)

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

      For the 3-month

period ended

September 30,

      For the 9-month

period ended

September 30,

2013     2012   2013     2012 HK$ HK$   HK$     HK$     Revenues 286,835 369,234 881,902 982,728 Cost of revenues (226,847)     (310,000)   (684,256)     (859,452) Gross profit 59,988 59,234 197,646 123,276   Operating expenses, net Selling, general and administrative expenses (41,379) (23,003) (121,104) (65,676) Other income (858) 1,502 1,872 2,620 Loss on disposal of property, plant and equipment

(13,636)

   

(1,240)

 

(16,408)

   

(1,203)

Total operating expenses, net (55,873)     (22,741)   (135,640)     (64,259)   Income from operations 4,115 36,493 62,006 59,017   Interest income 73 50 178 145 Interest expense (272)     (596)   (950)     (1,810) Income before income tax expense 3,916 35,947 61,234 57,352   Income tax expense (3,688)     (1,247)   (4,350)     (5,865) Net income 228 34,700 56,884 51,487   Other comprehensive income Foreign currency translation adjustment 479     (768)   2,776     (649) Comprehensive income attributable to

Plastec Technologies, Ltd.

707

   

33,932

 

59,660

   

50,838

  Net income per share:   Weighted average number of ordinary shares 13,594,107     14,292,228   13,681,314     14,498,320   Weighted average number of diluted

ordinary shares

13,594,107

   

14,292,228

 

13,681,314

   

14,498,320

  Basic income per share

attributable to Plastec Technologies, Ltd.

HK$0.0

   

HK$2.4

 

HK$4.2

   

HK$3.6

  Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$0.0

   

HK$2.4

 

HK$4.2

   

HK$3.6

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED BALANCE SHEETS

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

    (Unaudited)

 

September 30,

  (Audited)

 

December 31,

ASSETS

2013   2012 HK$ HK$ Current assets Cash and cash equivalents 307,480 309,862

Trade receivables, net of allowances for doubtful accounts of

HK$nil, and HK$nil as of December 31, 2012 and September

30, 2013, respectively

266,017

257,299

Inventories 96,262 97,467 Deposits, prepayment and other receivables 47,201   35,471 Total current assets 716,960 700,099   Property, plant and equipment, net 363,606 440,383 Prepaid lease payments, net 22,555 23,719 Other assets 4,971 14,503 Deferred tax assets 4,288 - Intangible assets 438   438 Total assets 1,112,818   1,179,142

LIABILITIES AND SHAREHOLDERS’ EQUITY

  Current liabilities Bank borrowings 46,373 96,892 Trade payables 128,435 151,436 Other payables and accruals 87,598 115,715 Tax payable 43,969   25,225 Total current liabilities 306,375 389,268   Deferred tax liabilities -   11,629 Total liabilities 306,375   400,897   Commitments and contingencies - -   Shareholders’ equity

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

authorized 14,292,228 and 13,524,138 shares issued and

outstanding as of December 31, 2012 and September 30,

2013, respectively)

 

105

 

112

Additional paid-in capital 53,877 85,332 Accumulated other comprehensive income 17,300 14,524 Retained earnings 735,161   678,277 Total shareholders’ equity 806,443   778,245       Total liabilities and shareholders’ equity 1,112,818   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 9-month

period ended September 30,

  2013     2012     HK$ HK$ Operating activities Net income 56,884 51,487

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization 95,405 118,375 Loss on disposal of property, plant and equipment 16,408 1,203 Deferred tax credit (15,917 ) - Changes in operating assets and liabilities: Trade receivables (8,718 ) (76,547 ) Inventories 1,205 13,285 Deposits, prepayment and other receivables (11,730 ) (8,785 ) Trade payables (23,001 ) 9,657 Other payables and accruals (28,117 ) 20,120 Tax payables   18,744     6,192   Net cash provided by operating activities   101,163     134,987     Investing activities Purchase of property, plant and equipment (23,281 ) (69,066 ) Proceeds from disposal of property, plant and equipment 3,811 12,491 Deposits for purchase of property, plant and equipment   (353 )   (9,988 ) Net cash used in investing activities   (19,823 )   (66,563 )   Financing activities Repurchases of shares and/or warrants (35,979 ) (3,020 ) Net repayment of bank borrowings (50,519 ) (28,015 ) Repayment of capital lease obligations   -     (1,526 ) Net cash used in financing activities   (86,498 )   (32,561 )     Net (decrease)/increase in cash and cash equivalents (5,158 ) 35,863   Effect of exchange rate changes on cash and cash equivalents 2,776 (400 )   Cash and cash equivalents, beginning of period   309,862     187,089   Cash and cash equivalents, end of period   307,480     222,552     Supplementary disclosures of cash flow information: Interest paid, net   772     1,665   Income taxes paid/(refunded)   881     (327 )

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)

      Three Months Ended       Nine Months Ended September 30     September 30 September 30     September 30 2013     2012       2013     2012 HKD     HKD       HKD     HKD Net Income (note) 14,722 34,438 71,420 50,070   Plus Interest expenses 272 596 950 1,810 Minus Interest incomes (73) (50) (178) (145) Plus Income tax expenses 3,688 1,247 4,350 5,865         Income from operations 18,609 36,231 76,542 57,600   Plus Depreciation and Amortization 30,896 40,137 95,405 118,375                     Adjusted EBITDA 49,505     76,368     171,947     175,975   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, 212-836-9606Senior Vice Presidentaprior@equityny.comorIn ChinaKatherine Yao, 86 10 6587 6435Associatekyao@equityny.com