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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 and Thailand, today reported unaudited financial results for the second quarter and six-months ended June 30, 2014. 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.

Financial and Operating Highlights for the Three Months Ended June 30, 2014(all comparisons to prior year)

• Sales of $33.7 million, a decrease of 12.5% compared to $38.5 million, as a result of the Company reducing lower margin product orders from existing customers and rescheduling of certain shipments to the next quarter
• Gross margin of 19.1%, compared to 25.5%
• Adjusted EBITDA of $6.4 million, compared to $8.6 million
• Net income of $2.3 million, or $0.18 per diluted share based on 12.9 million diluted shares outstanding, compared to $5.7 million, or $0.42 per diluted share based on 13.7 million diluted shares outstanding

Fiscal 2014 Six-Month Financial and Operating Highlights(all comparisons to same period of prior year)

• Sales of $68.9 million, a decrease of 9.7% compared to $76.3 million
• Gross margin of 21.6%, compared to 23.1%
• Adjusted EBITDA of $14.7 million, compared to $15.7 million
• Net income of $10.2 million, or $0.78 per diluted share based on 12.9 million diluted shares outstanding, compared to $7.3 million, or $0.53 per diluted share based on 13.7 million diluted shares outstanding
• $16.6 million in cash generated from operations for the six months ended June 30, 2014, compared to $10.1 million

Balance Sheet Highlights

• $72.1 million in working capital at June 30, 2014, compared to $58.0 million at December 31, 2013
• Book value per share increased to $8.53 at June 30, 2014, compared to $7.96 at December 31, 2013

Dividends Distribution

• In May 2014, the Company paid a cash dividend of $0.20 per ordinary share for the year ended December 31, 2013.
• The Company also announced today that its Board of Directors has declared an interim cash dividend of $0.10 per ordinary share for the fiscal 2014-second quarter ended June 30, 2014. The interim dividend will be payable on or about September 5, 2014 to shareholders of record as of August 29, 2014.

Management Comments

Mr. Kin Sun Sze-To, Chairman of Plastec, stated, “We were pleased to achieve profitability despite the effect of slower market conditions on our top line, particularly in the higher margin product categories where Plastec specializes. We were also affected by changes in quarterly order timing from certain customers, where purchases were pushed into Plastec’s third quarter. We feel that a number of our long-term clients are beginning to focus on the coming 2014 holiday season for new launches of products, which typically will lead to a seasonally larger third quarter for our Company as production ramps up. We were pleased to report positive net income and cash from operations during the period. We believe that our strong financial condition will benefit the Company as we come out of this market cycle, as many of our lesser capitalized competitors may not be able to consistently upgrade their facilities to the degree that Plastec has done in recent years.”

Chairman Sze-To continued, “We continue to balance our need to continue investing in our business through additional equipment repurchases and capacity expansion while also providing a return on our shareholders’ investment. We declared an interim dividend for the fiscal 2014 second quarter as a measure of rewarding our shareholders for their continued support. We also are extending our securities repurchase plan for another year, as we feel that the prices of Plastec’s securities remain an attractive investment opportunity. We remain steadfast in our confidence in Plastec’s fundamentals as reflected with this extension, and expect to continue seeking ways to generate long-term shareholder value.”

Selected Financial Highlights in USD ($ in millions, except number of shares and per share data) 3 months ended June 30, 2014   3 months ended June 30, 2013  

PercentageChange

  6 months ended June 30, 2014   6 months ended June 30, 2013   Percentage Change   Sales $33.7 $38.5 (12.5%) $68.9 $76.3 (9.7%) Cost of Revenues $27.3 $28.7 (4.9%) $54.0 $58.6 (7.9%) Gross Profit $6.4 $9.8 (34.5%) $14.9 $17.6 (15.8%) Gross Profit Margin 19.1% 25.5% 21.6% 23.1%   Income from Operations $2.7 $4.5 (38.6%) $11.4 $7.4 54.2% Operating Margin 8.2% 11.6% 16.6% 9.7%   Net Income $2.3 $5.7 (60.4%) $10.2 $7.3 39.7% Net Margin 6.7% 14.8% 14.7% 9.5%   Weighted Average Number of Diluted Ordinary Shares Outstanding 12,938,128 13,666,376 12,938,128 13,725,640 Diluted EPS $0.18 $0.42 (57.6%) $0.78 $0.53 48.8% Adjusted EBITDA* $6.4   $8.6   (25.5%)   $14.7   $15.7   (6.5%)

* Reconciliation table at end of release

Balance Sheet Highlights (USD in Millions)     6/30/2014     12/31/2013   Percentage Change Cash and Cash Equivalents $60.1 $44.7 34.4% Total Current Assets $110.7 $96.6 14.6% Total Assets $155.3 $148.1 4.9% Working Capital $72.1 $58.0 24.4% Total Long-term Debt $6.4 $6.4 nil Total Liabilities $45.0 $45.0 nil Shareholders’ Equity $110.3 $103.0 7.1% Total Liabilities and Shareholders' Equity $155.3 $148.1 4.9%

2014 Second Quarter and First Half Financial Review

• Total sales for the three months period ended June 30, 2014 were $33.7 million compared to $38.5 million in the prior-year period. The decrease was due to certain shipments being re-scheduled to the next quarter by customers and continued elimination of sales orders with low margins. Total sales for the six months period ended June 30, 2014 were $68.9 million, compared to $76.3 million in the corresponding period in the prior year.
• The Company’s gross profit was $6.4 million during the three months period ended June 30, 2014 compared to $9.8 million in the prior-year period, and gross profit margin was 19.1% compared to 25.5%. The Company’s decreased gross profit was in line with lower revenues, with margins affected by higher raw materials costs consumed during the period compared to the corresponding period in the prior year. For the six months period ended June 30, 2014, the Company’s gross profit was $14.9 million, or 21.6% of revenues, compared to $17.6 million, or 23.1% of revenues, in the prior year period.
• Total selling, general and administrative (SG&A) expenses during the three months period ended June 30, 2014 decreased to $3.5 million, or 10.5% of revenues, compared to the $5.4 million, or 13.9% of revenues, in the corresponding period of the prior year because of lower administrative expenses and the Company’s capacity structuring efforts, and also arising from an exchange gain of approximately $756,000 during the period compared to an exchange loss of $179,500 in the corresponding period in the prior year. For the six months period ended June 30, 2014, SG&A decreased by approximately 27.9% to $7.4 million, or 10.7% of revenues, compared to $10.2 million, or 13.4%, in the corresponding period of the prior year, mainly due to the implementation of costs containment strategies and capacity restructuring during 2013, which resulted in the downsizing and cessation of Plastec’s operations at Heyuan and Zuhai, and was augmented by an exchange gain recorded during the period of approximately $1.4 million.
• Income from operations was $2.7 million, or 8.2% of revenues, during the three months period ended June 30, 2014, compared to $4.5 million, or 11.6% of revenues, in the prior-year period. For the first half of 2014, the Company reported income from operations of $11.4 million, or 16.6% of revenues, compared to $7.4 million, or 9.7% of revenues, during the prior year period.
• Adjusted EBITDA for the three months ended June 30, 2014 was $6.4 million, compared to $8.6 million in the prior-year period. For the first half of 2014, adjusted EBITDA was $14.7 million, compared to $15.7 million in the prior year period.
• Net income for the three months period ended June 30, 2014 was $2.3 million, or $0.18 per share based on approximately 12.9 million weighted average diluted shares outstanding, compared to $5.7 million, or $0.42 per share based on approximately 13.7 million weighted average diluted shares outstanding, in the prior-year period. For the six months period ended June 30, 2014, net income was $10.2 million, or $0.78 per share based on approximately 12.9 million weighted average diluted shares outstanding, compared to $7.3 million, or $0.53 per share based on approximately 13.7 million weighted average diluted shares, in the prior-year period.

Extension of Securities Repurchase Plan

The Company announced today that its Board of Directors has approved an extension of its previously announced securities repurchase plan (as expanded) through September 25, 2015, allowing Plastec to purchase up to $5 million of its ordinary shares, warrants, and units 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 ordinary shares and no warrants/units 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 and Thailand through its wholly owned subsidiaries. With over 4,700 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 June 30,

  For the 6-month

period ended June 30,

2014   2013 2014   2013 HK$   HK$ HK$   HK$     Revenues 262,940 300,381 537,193 595,067 Cost of revenues (212,708 )   (223,637 ) (421,255 )   (457,409 ) Gross profit 50,232 76,744 115,938 137,658   Operating expenses, net Selling, general and administrative expenses (27,650 ) (41,781 ) (57,500 ) (79,725 ) Other income 1,106 2,644 1,163 2,730 Gain/(loss) on disposal of a subsidiary (2,605 ) - 29,557 - Written-off of property, plant and equipment - - (440 ) - Gain/(loss) on disposal of property, plant and equipment 364     (2,705 ) 552     (2,772 ) Total operating expenses, net (28,785 )   (41,842 ) (26,668 )   (79,767 )   Income from operations 21,447 34,902 89,270 57,891   Interest income 388 54 555 105 Interest expense (447 )   (290 ) (868 )   (678 ) Income before income tax expense 21,388 34,666 88,957 57,318   Income tax credit/(expense) (3,777 )   9,812   (9,781 )   (662 ) Net income 17,611 44,478 79,176 56,656   Other comprehensive income/(expense) Foreign currency translation adjustment -     979   (2,151 )   2,297  

Comprehensive income attributable to Plastec Technologies, Ltd.

17,611

   

45,457

 

77,025

   

58,953

    Net income per share:   Weighted average number of ordinary shares 12,938,128     13,666,376   12,938,128     13,725,640     Weighted average number of diluted

ordinary shares

12,938,128

   

13,666,376

 

12,938,128

   

13,725,640

    Basic income per share

attributable to Plastec Technologies, Ltd.

HK$1.4

   

HK$3.3

 

HK$6.1

   

HK$4.1

    Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$1.4

   

HK$3.3

 

HK$6.1

   

HK$4.1

   

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, December 31,   2014   2013 HK$ HK$  

ASSETS

Current assets Cash and cash equivalents 468,772 348,901 Trade receivables, net of allowances for doubtful accounts of HK$nil, and HK$nil as of December 31, 2013 and June 30, 2014, respectively

250,624

269,419

Inventories 108,103 107,058 Deposits, prepayment and other receivables   35,896   28,139 Total current assets 863,395 753,517   Property, plant and equipment, net 310,332 364,149 Prepaid lease payments, net 20,455 22,167 Other assets 2,360 2,325 Deferred tax assets 14,349 12,225 Intangible assets   438   438 Total assets   1,211,329   1,154,821    

LIABILITIES AND SHAREHOLDERS’ EQUITY

    Current liabilities Bank borrowings 26,287 37,782 Trade payables 116,529 105,428 Other payables and accruals 111,524 116,608 Tax payable   46,533   41,389 Total current liabilities 300,873 301,207   Bank Borrowings   50,000   50,000 Total liabilities   350,873   351,207   Commitments and contingencies - -   Shareholders’ equity Ordinary shares (US$0.001 par value; 100,000,000 authorized 12,938,128 and 12,938,128 shares issued and outstanding as of December 31, 2013 and June 30, 2014, respectively)

 

101

 

101

Additional paid-in capital 26,455 26,455 Accumulated other comprehensive income 15,750 17,901 Retained earnings   818,150   759,157 Total shareholders’ equity   860,456   803,614         Total liabilities and shareholders’ equity   1,211,329   1,154,821  

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,

2014   2013 HK$ HK$ Operating activities Net income 79,176 56,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 56,106 64,509 Gain on disposal of a subsidiary (29,557 ) - Loss on written-off of property, plant and equipment 440 - Loss/(gain) on disposal of property, plant and equipment (552 ) 2,772 Deferred tax credit (1,358 ) (14,361 ) Changes in operating assets and liabilities: Trade receivables 18,795 5,983 Inventories (1,045 ) 8,655 Deposits, prepayment and other receivables (7,783 ) (22,690 ) Trade payables 11,101 (17,217 ) Other payables and accruals (4,493 ) (19,805 ) Tax payables 8,539     13,981   Net cash provided by operating activities 129,369     78,483     Investing activities Purchase of property, plant and equipment (16,577 ) (19,842 ) Proceeds from disposal of a subsidiary 43,447 - Proceeds from disposal of property, plant and equipment 749 1,833 Deposits for purchase of property, plant and equipment (2,360 )   (353 ) Net cash (used in)/generated from investing activities 25,259     (18,362 )   Financing activities Repurchases of shares - (32,515 ) Net repayment of bank borrowings (11,495 ) (41,917 ) Dividends paid (20,183 )   -   Net cash used in financing activities (31,678 )   (74,432 )     Net increase/(decrease)in cash and cash equivalents 122,950 (14,311 )   Effect of exchange rate changes on cash and cash equivalents (3,079 ) 2,297   Cash and cash equivalents, beginning of period 348,901     309,862   Cash and cash equivalents, end of period 468,772     297,848     Supplementary disclosures of cash flow information: Interest paid, net 317     573   Income taxes paid 2,602     1,043    

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)

            Three Months Ended Six Months Ended June 30   June 30 June 30   June 30 2014     2013   2014     2013   HKD   HKD HKD   HKD Net Income (note) 18,746 44,539 48,344 56,698   Plus Interest expenses 447 290 868 678 Minus Interest income (388 ) (54 ) (555 ) (105 ) Plus Income tax expenses 3,777 (9,812 ) 9,781 662         Income from operations 22,582 34,963 58,438 57,933   Plus Depreciation and Amortization 27,556 32,292 56,106 64,509               Adjusted EBITDA 50,138     67,255     114,544     122,442     Note: Excl. other incomes and gain/(loss) on disposals/written -off

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 President(212) 836-9606aprior@equityny.comorIn ChinaKatherine Yao, Associate86 10 6587 6435kyao@equityny.com