NEWS RELEASE
CONTACT: Gary
S. Maier
Maier & Company,
Inc.
(310) 442-9852
HIGHWAY HOLDINGS REPORTS FISCAL 2008 THIRD QUARTER RESULTS
-- Net Sales Climb 7.9 Percent for Nine Months;
Strikes Disrupt Operations; Backlog Up for Quarter --
HONG KONG — February 15, 2008 —
Highway Holdings Limited (Nasdaq:HIHO) today reported results for its third
fiscal quarter ended December 31, 2007,
reflecting the impact of labor unrest in China associated
with new government regulations concerning labor benefits and
entitlements, overtime work and worker compensation claims.
Net
sales for the third fiscal quarter were $7.7
million compared with $8.8 million in the same quarter in
fiscal 2007. For the third quarter
of fiscal 2008, the company reported a net loss of $905,000,
or $0.24 per share, compared with net income of $278,000,
or $0.08 per diluted share, last year.
Net sales for the first nine months of fiscal 2008 increased 7.9 percent to $25.4 million from $23.5 million a year earlier.
For the same time period, the company reported
a net loss of $574,000, or $0.15 per share, compared with net income of
$1,036,000, or $0.29 per diluted share, a year earlier.
Metal, mechanical and electronic OEM sales for the nine months represented
approximately $24.3 million, or 95.6 percent of the company’s total net sales
Gross margin was 11.1 percent for the third quarter compared with 20.6 percent in the 2007 three-month period. For the nine-months, gross margin was
17.0 percent compared with 20.4 percent in the same period
a year ago.
Selling, general and administrative expenses increased by $268,000 for the fiscal
third quarter and $972,000 for the current nine-month period as a result of its Golden Bright division that the company added
last year, as well as
extraordinary costs associated with the labor problems.
Kohl noted the company’s balance sheet remains strong. The company’s current ratio was 2.0:1 at
“Results for the fiscal third quarter were impacted
by labor strikes at our facilities, which severely limited our production
during this past quarter. Labor
strikes have affected a majority of companies in the region, since the Chinese
Government commenced strictly enforcing labor laws regarding overtime limits last
summer. In addition, a new Chinese national labor law concerning working hours,
overtime work and other general employee benefits and compensation took effect January
1, 2008, which created further
confusion and misunderstanding among corporations and employees,” said
He noted that the four strikes disrupted the
company’s operations and impacted its profitability, including approximately $539,000
in extraordinary charges -- while creating a backlog of unfilled orders of
approximately $3.0 million
Kohl indicated that the company, as a protective
measure, negotiated with its employees and provided certain extraordinary
payment and salary adjustments.
“This eventually defused the situation in January,” Kohl said.
He indicated that a sharp reduction in
overtime work coupled with an overall labor shortage in China, along with
strikes and work slowdowns, resulted in significantly reduced working hours,
less production output and higher expenses.
“While
we anticipated some future adverse impact to our operations when we reported
the company’s fiscal second quarter results due to the labor situation at the
time, we clearly did not foresee a situation of such large proportions. In fact, it was our expectation that the
company’s financial results would have reflected an increase in revenues and
profitability. Historically our
relationship with the company’s workforce has been excellent and we look
forward to avoiding such situations in the future,” Kohl said.
Nevertheless, Kohl noted that it is clear
that, because of the changing operating environment for manufacturing companies
in China and in order for Highway Holdings to continue its growth as an OEM
company, Highway Holdings will need to decrease its dependence on low-cost
labor and increase the amount of automation in its factories and, possibly,
also shift some of its production to other low-cost countries in Asia. He indicated that the shift to increased
automation was already underway and that the company has been investigating
other possible alternatives.
“We are optimistic that most of the labor
unrest is behind us. As a result of
the strong backlog that the company has accumulated, we are well positioned to achieve
better financial performance in the near future – which is obviously dependent
on the company’s ability to maintain an adequate workforce and avoid the labor
disruptions of the past,” Kohl said.
(more)
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. It also
manufactures finished products, such as LED lights, radio chimes and other
electronic products. Highway
Holdings is headquartered in Hong Kong and operates four manufacturing
facilities in the People's Republic of
Except
for the historical information contained herein, the matters discussed in this
press release are forward-looking statements which involve risks and
uncertainties, including but not limited to the uncertainty regarding the new
labor laws in China, the company’s ability to attract and retain sufficient
workers, 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.
(Financial
Tables Follow)
#
# #
HIGHWAY
HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated
Statement of Income
(Dollars in thousands,
except per share data)
(Unaudited)
|
|
Three Months Ended |
|
Nine Months
Ended |
||||
|
|
December 31, |
|
December 31, |
||||
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
|
|
|
|
|
|
|
|
Net sales |
$ 7,665 |
|
$ 8,800 |
|
$ 25,393 |
|
$ 23,523 |
|
Cost of sales |
6,817 |
|
6,983 |
|
21,078 |
|
18,716 |
|
Gross profit |
848 |
|
1,817 |
|
4,315 |
|
4,807 |
|
Selling, general and
administrative expenses |
1,863 |
|
1,595 |
|
4,997 |
|
4,025 |
|
Operating income /(loss) |
$(1,015) |
|
$ 222 |
|
$ (682) |
|
$ 782 |
|
|
|
|
|
|
|
|
|
|
Non-operating items |
|
|
|
|
|
|
|
|
Interest expenses |
(59) |
|
(68) |
|
(181) |
|
(169) |
|
Exchange gain (loss), net |
94 |
|
45 |
|
176 |
|
271 |
|
Interest income |
32 |
|
48 |
|
82 |
|
129 |
|
Other income |
43 |
|
37 |
|
50 |
|
55 |
|
Total non-operating income (expenses) |
110 |
|
62 |
|
127 |
|
286 |
|
|
|
|
|
|
|
|
|
|
Net income / (loss) before income tax |
(905) |
|
284 |
|
(555) |
|
1,068 |
|
Income taxes |
0 |
|
6 |
|
19 |
|
32 |
|
Net income / (loss) |
$ (905) |
|
$ 278 |
|
$
(574) |
|
$
1,036 |
|
|
|
|
|
|
|
|
|
|
Earnings / (loss) per share – basic |
$(0.24) |
|
$0.08 |
|
$(0.15) |
|
$0.29 |
|
Weighted average
number of shares – basic |
3,797 |
|
3,623 |
|
3,797 |
|
3,623 |
|
|
|
|
|
|
|
|
|
|
Earnings / (loss) per share – diluted |
$(0.24) |
|
$0.08 |
|
$(0.15) |
|
$0.28 |
|
Weighted average
number of shares – diluted |
3,797 |
|
3,663 |
|
3,797 |
|
3,663 |
Consolidated Balance Sheet
(In
thousands, except per share data)
|
|
|
|
|
|
|
December 31, |
|
March 31 |
|
|
2007 |
|
2007 |
|
|
(Unaudited) |
|
|
|
Current
assets |
|
|
|
|
Cash and cash
equivalents |
$ 3,662 |
|
$ |