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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 third quarter and nine months ended September 30, 2014. See financial 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 September 30, 2014(all comparisons to prior year)

• Sales of $44.0 million, an increase of 19.7% compared to $36.8 million, as a result of shipments from the Company’s second quarter being rescheduled to the third quarter and improving market conditions for new product launches
• Gross margin of 25.8%, compared to 20.9%
• Adjusted EBITDA of $8.7 million, compared to $6.3 million
• Net income of $4.3 million, or $0.33 per diluted share based on 12.9 million diluted shares outstanding, compared to $29,000, or $0.00 per diluted share based on 13.6 million diluted shares outstanding

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

• Sales of $112.9 million, a decrease of 0.2% compared to $113.1 million
• Gross margin of 23.2%, compared to 22.4%
• Adjusted EBITDA of $23.4 million, compared to $22.0 million
• Net income of $14.4 million, or $1.12 per diluted share based on 12.9 million diluted shares outstanding, compared to $7.3 million, or $0.54 per diluted share based on 13.7 million diluted shares outstanding
• $23.4 million in cash generated from operations for the nine months ended September 30, 2014, compared to $13.0 million

Balance Sheet Highlights

• $75.7 million in working capital at September 30, 2014, compared to $58.0 million at December 31, 2013
• Book value per share increased to $8.7 at September 30, 2014, compared to $8.0 at December 31, 2013
• On August 11, 2014, the Company declared an interim cash dividend of $0.10 per ordinary share for the fiscal 2014-second quarter ended June 30, 2014. The interim dividend was paid 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 continue to focus on our core competencies, which are providing high-precision plastic injection molding services while investing in our business to provide sustainability over the long-term. During the third quarter, we continued to see stable margins throughout our market segments through capturing more first run product lines from our long-term customer base in advance of the coming holiday season. In addition, we are continuing to properly utilize our scale to contain raw material costs, and keeping operating costs streamlined at our facilities in China and Thailand. We have been pleased with the Company’s cash generation in 2014, and have continued to balance our need to position Plastec for long-term growth while also providing stable returns for our shareholders. We need to regularly upgrade the machinery used in our operations in order to keep pace with various technological changes and changing consumer preferences. We feel that the Company has a balance sheet that provides considerable room for expansion and provides an advantage over our lesser-capitalized competitors.”

Selected Financial Highlights in USD ($ in millions, except number of shares and per share data)   3 months ended September 30, 2014   3 months ended September 30, 2013 Percentage Change   9 months ended September 30, 2014   9 months ended September 30, 2013 Percentage Change Sales $ 44.0 $ 36.8 19.7 % $ 112.9 $ 113.1 (0.2 %) Cost of Revenues $ 32.7 $ 29.1 12.3 % $ 86.7 $ 87.7 (1.2 %) Gross Profit $ 11.3 $ 7.7 47.5 % $ 26.2 $ 25.3 3.4 % Gross Profit Margin 25.8 % 20.9 % 23.2 % 22.4 %   Income from Operations $ 5.4 $ 0.5 917.6 % $ 16.8 $ 7.9 111.5 % Operating Margin 12.2 % 1.4 % 14.9 % 7.0 %   Net Income $ 4.3 $ 0.03 - $ 14.4 $ 7.3 97.9 % Net Margin 9.7 % 0.1 % 12.8 % 6.5 %   Weighted Average Number of Diluted Ordinary Shares Outstanding 12,938,128 13,594,107 12,938,128 13,681,314 Diluted EPS $ 0.33 $ 0.00 - $ 1.12 $ 0.54 107.1 % Adjusted EBITDA* $ 8.7     $ 6.3   37.8 %   $ 23.4     $ 22.0   6.3 %

* Reconciliation table at end of release

Balance Sheet Highlights (USD in Millions)   9/30/2014     12/31/2013   Percentage Change Cash and Cash Equivalents $ 62.3 $ 44.7 39.3 % Total Current Assets $ 116.9 $ 96.6 21.0 % Total Assets $ 160.0 $ 148.1 8.1 % Working Capital $ 75.7 $ 58.0 30.6 % Total Long-term Debt $ 6.4 $ 6.4 - Total Liabilities $ 47.6 $ 45.0 5.7 % Shareholders’ Equity $ 112.5 $ 103.0 9.2 % Total Liabilities and Shareholders' Equity $ 160.0 $ 148.1 8.1 %

2014 Third Quarter and First Nine Months Financial Review

• Total sales for the three-month period ended September 30, 2014 were $44.0 million, an increase of 19.7% compared to $36.8 million in the prior-year period. The increase was largely due to certain shipments being re-scheduled from the second quarter into the third quarter by customers, along with higher new product orders from customers. Total sales for the nine-month period ended September 30, 2014 were $112.9 million, compared to $113.1 million in the corresponding period in the prior year.
• The Company’s gross profit was $11.3 million during the three-month period ended September 30, 2014 compared to $7.7 million in the prior-year period, and gross profit margin was 25.8% compared to 20.9% in the prior-year period. The Company’s higher gross margin was largely due to a product mix that included new product orders, which typically generate a greater margin. For the nine-month period ended September 30, 2014, the Company’s gross profit was $26.2 million, or 23.2% of revenues, compared to $25.3 million, or 22.4% of revenues, in the prior-year period.
• Income from operations was $5.4 million, or 12.2% of revenues, during the three-month period ended September 30, 2014, compared to $528,000, or 1.4% of revenues, in the prior-year period. For the first nine months of 2014, the Company reported income from operations of $16.8 million, or 14.9% of revenues, compared to $7.9 million, or 7.0% of revenues, in the prior-year period.
• Adjusted EBITDA for the three months ended September 30, 2014 was $8.7 million, compared to $6.3 million in the prior-year period. For the first nine months of 2014, adjusted EBITDA was $23.4 million, compared to $22.0 million in the prior-year period.
• Net income for the three-month period ended September 30, 2014 was $4.3 million, or $0.33 per share based on approximately 12.9 million weighted average diluted shares outstanding, compared to $29,000, or $0.00 per share based on approximately 13.6 million weighted average diluted shares outstanding, in the prior-year period. For the nine-month period ended September 30, 2014, net income was $14.4 million, or $1.12 per share based on approximately 12.9 million weighted average diluted shares outstanding, compared to $7.3 million, or $0.54 per share based on approximately 13.7 million weighted average diluted shares, in the prior-year period.

Update on Securities Repurchase Plan

The Company has a repurchase plan (as expanded and extended) in place through September 25, 2015, allowing it 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, the Company had repurchased 586,010 ordinary shares and 547,600 warrants under the current plan, which was first implemented in September 2013 following completion of its previous 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 and Thailand through its wholly owned subsidiaries. With over 4,800 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,

2014     2013   2014     2013   HK$   HK$ HK$   HK$     Revenues 343,270 286,835 880,463 881,902 Cost of revenues (254,790 )   (226,847 ) (676,045 )   (684,256 ) Gross profit 88,480 59,988 204,418 197,646   Operating expenses, net Selling, general and administrative expenses (47,018 ) (41,379 ) (104,517 ) (121,104 ) Other income/(expenses) 463 (858 ) 1,627 1,872 Gain/(loss) on disposal of a subsidiary (432 ) - 29,125 - Gain/(loss) on disposal of property, plant and equipment 383     (13,636 ) 494     (16,408 ) Total operating expenses, net (46,604 )   (55,873 ) (73,271 )   (135,640 )   Income from operations 41,876 4,115 131,147 62,006   Interest income 501 73 1,056 178 Interest expense (413 )   (272 ) (1,281 )   (950 ) Income before income tax expense 41,964 3,916 130,922 61,234   Income tax expense (8,635 )   (3,688 ) (18,348 )   (4,350 ) Net income 33,329 228 112,574 56,884   Other comprehensive income/(expense) Foreign currency translation adjustment (6,179 )   479   (8,330 )   2,776   Comprehensive income attributable to

Plastec Technologies, Ltd.

27,150

   

707

 

104,244

   

59,660

    Net income per share:   Weighted average number of ordinary shares 12,938,128     13,594,107   12,938,128     13,681,314     Weighted average number of diluted

ordinary shares

12,938,128

   

13,594,107

 

12,938,128

   

13,681,314

    Basic income per share

attributable to Plastec Technologies, Ltd.

HK$2.6

 

HK$0.0

HK$8.7

 

HK$4.2

  Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$2.6

 

HK$0.0

HK$8.7

 

HK$4.2

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,

2014

2013

HK$

HK$

ASSETS

Current assets Cash and cash equivalents 485,883 348,901 Trade receivables, net of allowances for doubtful accounts of HK$nil, and HK$nil as of December 31, 2013 and September 30, 2014, respectively

290,579

269,419

Inventories 98,935 107,058 Deposits, prepayment and other receivables   36,606   28,139 Total current assets 912,003 753,517   Property, plant and equipment, net 292,052 364,149 Prepaid lease payments, net 20,074 22,167 Other assets 10,681 2,325 Deferred tax assets 13,141 12,225 Intangible assets   438   438 Total assets   1,248,389   1,154,821

LIABILITIES AND SHAREHOLDERS’ EQUITY

    Current liabilities Bank borrowings 21,423   37,782 Trade payables 130,897 105,428 Other payables and accruals 113,571 116,608 Tax payable   55,321   41,389 Total current liabilities 321,212 301,207   Bank Borrowings   50,000   50,000 Total liabilities   371,212   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 September 30, 2014, respectively)

 

101

 

101

Additional paid-in capital 26,050 26,455 Accumulated other comprehensive income 9,569 17,901 Retained earnings   841,457   759,157 Total shareholders’ equity   877,177   803,614         Total liabilities and shareholders’ equity   1,248,389   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 9-month

period ended September 30,

  2014     2013     HK$   HK$ Operating activities Net income 112,574 56,884 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 82,859 95,405 Gain on disposal of a subsidiary (29,125 ) - (Gain)/loss on disposal of property, plant and equipment (494 ) 16,408 Deferred tax credit (1,829 ) (15,917 ) Changes in operating assets and liabilities: Trade receivables (21,159 ) (8,718 ) Inventories 8,123 1,205 Deposits, prepayment and other receivables (8,493 ) (11,730 ) Trade payables 25,470 (23,001 ) Other payables and accruals (2,449 ) (28,117 ) Tax payables   17,328     18,744   Net cash provided by operating activities   182,805     101,163     Investing activities Purchase of property, plant and equipment (24,740 ) (23,281 ) Proceeds from disposal of a subsidiary 43,015 - Proceeds from disposal of property, plant and equipment 1,204 3,811 Deposits for purchase of property, plant and equipment   (10,681 )   (353 ) Net cash (used in)/generated from investing activities   8,798     (19,823 )   Financing activities Repurchases of shares and/or warrants (406 ) (35,979 ) Net repayment of bank borrowings (16,360 ) (50,519 ) Dividends paid   (30,275 )   -   Net cash used in financing activities   (47,041 )   (86,498 )     Net increase/(decrease) in cash and cash equivalents 144,562 (5,158 )   Effect of exchange rate changes on cash and cash equivalents (7,580 ) 2,776   Cash and cash equivalents, beginning of period   348,901     309,862   Cash and cash equivalents, end of period   485,883     307,480     Supplementary disclosures of cash flow information: Interest paid, net   225     772   Income taxes paid   2,849     881  

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)

    Three Months Ended     Nine Months Ended Sept 30   Sept 30 Sept 30   Sept 30 2014     2013   2014     2013   HKD   HKD HKD   HKD Net Income (note) 32,915 14,722 81,328 71,420   Plus Interest expenses 413 272 1,281 950 Minus Interest income (501 ) (73 ) (1,056 ) (178 ) Plus Income tax expenses 8,635 3,688 18,348 4,350         Income from operations 41,462 18,609 99,901 76,542   Plus Depreciation and Amortization 26,753 30,896 82,859 95,405               Adjusted EBITDA 68,215     49,505     182,760     171,947  

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.hkEli D. Scher, Directoreli@plastec.com.hkorINVESTOR RELATIONS:The Equity Group Inc.Adam Prior, Senior Vice President212-836-9606aprior@equityny.comIn ChinaKatherine Yao, Associate86 10 6587 6435kyao@equityny.com