Highway Holdings Reports Fiscal 2019 Fourth Quarter and Year-End Results

HONG KONG, July 02, 2019 (GLOBE NEWSWIRE) -- Highway Holdings Limited (Nasdaq: HIHO) today reported results for its fiscal fourth quarter and year ended March 31, 2019 – reflecting the impact of lower orders from certain customers experiencing soft product demand and the loss of business due to continued inflationary pressures in China. 

Net loss for the fiscal fourth quarter was $186,000, or $0.05 per diluted share, compared with net income of $742,000, or $0.20 per diluted share, in the same quarter a year ago. Net sales for the same period were $3.8 million compared with $4.2 million a year ago.

Net loss for fiscal 2019 was $630,000, or $0.17 per share, compared with net income of $1,550,000, or $0.41 per diluted share, a year earlier. Net sales for fiscal 2019 were $14.3 million compared with $19.2 million a year ago.  

The sales decrease for fiscal 2019 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.

“We remain cautiously optimistic that business will improve in the future -- supported by ongoing pro-active strategic initiatives, particularly the increasing utilization of our Myanmar complex and the expected cost-savings and competitive advantage it provides for the long term. In the short term, we will not realize all the benefits from the favorable labor cost savings derived from our emerging Myanmar operation because these savings are being passed through to our customers, which contributes to lower pricing and lower sales turnover. Nonetheless, our ability to offer lower cost manufacturing in Myanmar is a benefit to customers seeking an increasingly attractive alternative to the inflationary trends in China. Furthermore, an escalating trade war between the United States and China enhances the appeal of our expanding capacity and manufacturing capabilities in Myanmar,” said Roland Kohl, chairman, president and chief executive officer of Highway Holdings.

Gross profit margin for fiscal 2019 was 25 percent compared with 35 percent a year earlier, due to increasing manufacturing costs related to the sharp reduction in sales and lower overhead absorption.

Selling, general and administrative expenses decreased to $1.1 million from $1.3 million, and $4.3 million from $4.8 million for the fiscal fourth quarter and 12-month period, respectively, on a year-over-year basis -- despite cost increases related to the relocation of machinery and equipment from China to the company’s operation in Myanmar.

Currency exchange rates slightly affected the company’s net loss for fiscal 2019. The company realized a small currency exchange loss in fiscal 2019 of $8,000 compared with a currency exchange gain of $63,000 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, despite the losses. Total current assets at March 31, 2019 were $13.4 million, with working capital of $8.3 million and a current ratio of 2.6:1. Total cash was $8.8 million after a long-term rental prepayment of $950,000 in Myanmar and a cash outlay for constructing an additional factory and an office building at the company’s Myanmar complex. Cash on hand totaled $2.32 per diluted share, exceeding all current and long-term liabilities combined by $3.7 million.

Kohl highlighted the company’s total equity of $10 million at March 31, 2019 -- representing approximately $2.67 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 ability to maintain lower costs at the Myanmar facility, the effects of lower costs in Myanmar on customer retention, the Company’s ability to streamline its operations through robotics and automation, 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.

(Financial Tables Follow)

Consolidated Statement of Income
(Dollars in thousands, except per share data)

 Three Months Ended Year Ended
 March 31,
 March 31,
  2019   2018   2019   2018 
Net sales$3,782  $4,177  $14,277  $19,166 
Cost of sales 2,956   2,012     10,697   12,424 
Gross profit 826   2,165   3,580   6,742 
Selling, general and administrative expenses 1,057   1,276   4,335   4,804 
Operating (loss)/income (231)  889   (755)  1,938 
Non-operating items       
Exchange gain/(loss), net 13   72   (8)  63 
Interest income 16   4   33   16 
Gain/(Loss) on disposal of assets -   2   28   50 
Other income / (expenses) -   5   8   5 
Total non-operating income / (expenses) 29   83   61   134 
Share of profits (loss) of equity investee -   -   -   - 
Net (loss)/income before income tax and non-controlling Interest (202)  972   (694)  2,072 
Income taxes 26    (244)  26   (512)
Net (loss)/income before non-controlling interests (176)  728   (668)  1,560 
Less: Net gain / (loss) attributable to non-controlling Interests 10   (14)  (38)  10 
Net (loss)/income attributable to Highway Holdings Limited shareholders($186) $742  ($630) $1,550 
Net income/(loss) per share:       
Basic($0.05)  $0.20 ($0.17) $0.41 
Diluted($0.05) $0.20  ($0.17) $0.41 
Weighted average number of shares outstanding:       
Basic 3,802   3,802  3,802   3,802 
Diluted 3,802   3,802  3,802   3,802 

Consolidated Balance Sheet
(In thousands, except per share data)

 March 31,March 31,
  2019  2018 
Current assets:  
Cash and cash equivalents$8,827 $11,267 
Accounts receivable, net of doubtful accounts 2,264  2,223 
Inventories 1,539  2,933 
Prepaid expenses and other current assets 722  749 
Total current assets 13,352  17,172 
Property, plant and equipment, (net)  886  770 
Goodwill -  77 
Long-term deposits 66  111 
Long-term loan receivable 75  - 
Long-term rental prepayment 871  - 
Investments in equity method investees -  - 
Total assets$15,250 $18,130 
Current liabilities:  
Accounts payable$1,161 $900 
Accrual expenses and other liabilities 2,989  3,982 
Income tax payable 602  803 
Dividend payable 329  623 
Total current liabilities 5,081  6,308 
Long term liabilities:  
Deferred income taxes 32  32 
Total liabilities 5,113  6,340 
Shareholders' equity:  
Common shares, $0.01 par value 38  38 
Additional paid-in capital 11,370  11,370 
Retained earnings (1,233) 347 
Accumulated other comprehensive (loss)/income (35) - 
Treasury shares, at cost – 5,049 shares as of March 31, 2019 and 2018, respectively (14) (14)
Non-controlling interest 11  49 
Total equity 10,137  11,790 
Total liabilities and shareholders' equity$15,250 $18,130 

Gary S. Maier
Maier & Company, Inc.
(310) 471-1288