6-K
HIGHWAY HOLDINGS LTD (HIHO)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of February 2020
Commission File Number 001-38490
HIGHWAY HOLDINGS LIMITED
(Translation of Registrant’s Name Into English)
Suite 1801, Level 18
Landmark North
39 Lung Sum Avenue
Sheung Shui
New Territories, Hong Kong
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ___
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ___
NewLeases
Highway Holdings Limited’s (the “Company”) principal manufacturing facilities currently consist of approximately 24,400 square meters of factory space and dormitories located in Shenzhen, China. The Shenzhen facilities are leased pursuant to a lease that expires on February 28, 2020. The Company entered into a new three-year lease for a portion of the existing Shenzhen facilities. Under the new lease, which becomes effective on March 1, 2020 and continues until February 28, 2023, the Company will lease approximately 15,200 square meters of space. Because the Company has relocated most of its labor intensive manufacturing and assembly operations to its facility in Yangon, Myanmar, the Company will no longer need the same amount of space in Shenzhen as it currently leases. Under the new lease, the Company will pay approximately $65,000 per month for rent (at the current RMB to U.S. dollar exchange rate), which rent will increase by 5% per year in the second and third year of the lease.
The Company leases its executive and administrative offices, located at Suite 1801, and Suites 1823-1823A, Level 18, Landmark North, 39 Lung Sum Avenue, Sheung Shui, New Territories, Hong Kong, under two leases that expire in March 2020. The Company has entered into two new, three-year leases that expire in March 2023 for these offices. The new leases have substantially the same terms as the current leases (the aggregate monthly rental cost of these offices will remain at approximately $11,000 per month, based on the exchange rate in affect as of the date of this report).
Earnings Press Release
On February 18, 2020, the Company issued the attached press release announcing the results for its fiscal third quarter and nine months ended December 31, 2019.
Exhibits
| 99.1 | Press release issued on February 18, 2020. |
|---|
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HIGHWAY<br> HOLDINGS LIMITED | ||
|---|---|---|
| Date: February<br> 18, 2020 | By | /s/<br> ROLAND W. KOHL |
| Roland<br> W. Kohl | ||
| Chief<br> Executive Officer |
2
Exhibit 99.1
NEWS RELEASE
| CONTACT: | Gary<br>S. Maier |
|---|
Maier & Company, Inc.
(310) 471-1288
HIGHWAYHOLDINGS REPORTS FISCAL 2020 THIRD QUARTER
ANDNINE-MONTH RESULTS
HONGKONG — February 18, 2020 — Highway Holdings Limited (Nasdaq:HIHO) today reported results for its fiscal third quarter and nine months ended December 31, 2019 -- reflecting increased sales and profitability.
Net sales for the fiscal 2020 third quarter increased 22 percent to $3.6 million from $2.9 million a year ago. For the same period, net income increased sharply to $318,000, or $0.08 per share, from a loss of $305,000, or $0.08 per share, in the same quarter a year earlier.
For the nine months, net sales were $9.6 million compared with $10.5 million a year ago. For the same period, the company reported net income of $123,000, or $0.03 per diluted share, compared with a net loss of $444,000, or $0.12 per share, a year earlier.
“Results for the quarter benefited from the company’s multi-year investments in Myanmar, and management’s strategic focus on reducing the company’s higher manufacturing costs. As a result, these lower manufacturing costs allowed us to maintain our margin targets and create favorable economics for our customers to attract business, which contributed, we believe, to our customers’ increased sales activity and our increased orders for the quarter,” said Roland Kohl, chairman, president and chief executive officer of Highway Holdings.
Kohl noted that the recent coronavirus outbreak and the country-wide shut down of factories across China to contain the spread of the virus will impact the company’s manufacturing facility in Shenzhen, China, as well as its supply chain. “Operations at our facilities in Shenzhen are currently halted, and we aren’t sure when we will be able to resume full operations. It is difficult to predict the long-term impact, though a short-term impact to our company and customers is to be expected. Fortunately, the company’s increasing reliance on our operations in Myanmar, which already produces more than half of our monthly sales volume, is a strategic benefit and we remain optimistic about the company’s long-term prospects,” Kohl said.
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Gross margin as a percentage of sales for the three months ended December 31, 2019 increased to 33.7 percent from 28.7 percent a year earlier, and gross margin as a percentage of sales for the nine months increased to 29.1 percent from 26.2 percent last year.
Selling, general and administrative expenses decreased for the quarter by $287,000, and also declined by $477,000 for the nine months on a year-over-year basis, despite the company’s continued additional expenses to support its Myanmar operation with technical and managerial personnel from the company’s Hong Kong and Chinese operations.
“The continued relocation of much of our business to Myanmar is resulting in lower-work load requirements for our operations in China. Consequently, we anticipate redundancies in our work force in China, which will lead to substantial severance expense, which has been accrued. While we do not expect these severance expenses to impact our bottom-line results, these payments will somewhat reduce our cash position,” Kohl said.
Net income for the fiscal third quarter reflects a currency exchange gain of $17,000 compared with a currency exchange loss of $56,000 a year ago. The company reported a $112,000 currency exchange gain for the fiscal 2020 nine months compared with a $21,000 currency exchange loss a year earlier -- mainly due to the weakening of the RMB and Kyat. The company does not engage in currency exchange rate hedging, and the fluctuations in the exchange rate of the RMB and Kyat are expected to affect the company’s future results.
Kohl noted the company’s balance sheet remains strong, despite a decrease in cash. The company’s total cash position at December 31, 2019 decreased to approximately $8.5 million, or approximately $2.2 per diluted share, from $8.8 million at March 31, 2019 -- reflecting an increase in inventory levels during the transition of operations from China to Myanmar, while maintaining order fills to customers.
The company’s current ratio was 2.5:1 at December 31, 2019, and the company's total cash exceeded all current and long-term liabilities combined by $2.6 million.
Separately, the company reported that it has entered into a new three-year lease for a portion of the existing Shenzhen, China facilities. Under the new lease, which becomes effective on March 1, 2020 and continues until February 28, 2023, the company will lease a total of approximately 15,200 square meters of space compared with its current lease of approximately 24,400 square meters of factory space and dormitories located in Shenzhen. The reduced space requirements reflect the company’s relocation of most of its labor-intensive manufacturing and assembly operations to its facility in Yangon, Myanmar. The company also reported that it has renewed the leases of its executive offices in Hong Kong. The Hong Kong office leases, which will expire in March 2020, have been extended for three years on terms substantially similar to the existing lease terms.
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AboutHighway 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 office is located in Hong Kong and its manufacturing facilities are located in Shenzhen in the People’s Republic of China and Yangon, Myanmar.
Exceptfor the historical information contained herein, the matters discussed in this press release are forward-looking statements whichinvolve risks and uncertainties, including but not limited to economic, competitive, governmental, political and technologicalfactors affecting the company's revenues, operations, markets, products and prices, and other factors discussed in the company’svarious filings with the Securities and Exchange Commission, including without limitation, the company’s annual reportson Form 20-F.
(Financial Tables Follow)
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HIGHWAYHOLDINGS LIMITED AND SUBSIDIARIES
ConsolidatedStatement of Income
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended December 31, | Nine Months Ended<br><br><br><br><br>December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 2019 | **** | 2018 | **** | 2019 | **** | 2018 | **** | ||||
| Net sales | $ | 3,590 | $ | 2,950 | $ | 9,630 | $ | 10,495 | ||||
| Cost of sales | 2,379 | 2,104 | 6,828 | 7,741 | ||||||||
| Gross profit | 1,211 | 846 | 2,802 | 2,754 | ||||||||
| Selling, general and administrative expenses | 875 | 1,162 | 2,801 | 3,278 | ||||||||
| Operating income/(loss) | 336 | (316 | ) | 1 | (524 | ) | ||||||
| Non-operating items | ||||||||||||
| Exchange gain /(loss), net | 17 | (56 | ) | 112 | (21 | ) | ||||||
| Interest income | 12 | 10 | 42 | 17 | ||||||||
| Gain on disposal of asset | 14 | - | 17 | 28 | ||||||||
| Other income | 0 | 2 | 1 | 8 | ||||||||
| Total non-operating income/ (expenses) | 43 | (44 | ) | 172 | 32 | |||||||
| Net income/(loss) before income tax and non-controlling interests | 379 | (360 | ) | 173 | (492 | ) | ||||||
| Income taxes | (60 | ) | - | (60 | ) | - | ||||||
| Net income/(loss) before non-controlling interests | 319 | (360 | ) | 113 | (492 | ) | ||||||
| Less: net gain/(loss) attributable to non-controlling interests | 1 | (55 | ) | (10 | ) | (48 | ) | |||||
| Net income/(loss) attributable to Highway Holdings Limited’s shareholders | $ | 318 | ($ | 305 | ) | $ | 123 | ($ | 444 | ) | ||
| Net income/(loss) per share - basic and diluted | $ | 0.08 | ($ | 0.08 | ) | $ | 0.03 | ($ | 0.12 | ) | ||
| Weighted average number of shares outstanding | ||||||||||||
| Basic | 3,977 | 3,801 | 3,895 | 3,801 | ||||||||
| Diluted | 3,977 | 3,801 | 3,895 | 3,801 |
HIGHWAYHOLDINGS LIMITED AND SUBSIDIARIES
ConsolidatedBalance Sheet
(In thousands, except per share data)
| March 31 | |||||
| 2019 | |||||
| Current assets: | |||||
| Cash and cash equivalents | 8,542 | $ | 8,827 | ||
| Accounts receivable, net of doubtful accounts | 2,483 | 2,264 | |||
| Inventories | 2,327 | 1,539 | |||
| Prepaid expenses and other current assets | 502 | 722 | |||
| Operating leases | 199 | - | |||
| Total current assets | 14,053 | 13,352 | |||
| Property, plant and equipment, (net) | 890 | 886 | |||
| Operating Lease | 1,157 | - | |||
| Long-term deposits | 54 | 66 | |||
| Long-term loan receivable | 95 | 75 | |||
| Long-term prepayment | 299 | - | |||
| Long-term rental prepayment | - | 871 | |||
| Total assets | 16,548 | $ | 15,250 | ||
| Current liabilities: | |||||
| Accounts payable | 1,211 | $ | 1,161 | ||
| Other liabilities and accrued expenses | 3,273 | 2,989 | |||
| Lease liability | 193 | - | |||
| Income tax payable | 625 | 602 | |||
| Dividend payable | 329 | 329 | |||
| Total current liabilities | 5,631 | 5,081 | |||
| Long term liabilities : | |||||
| Lease liability | 249 | - | |||
| Deferred income taxes | 32 | 32 | |||
| Total liabilities | 5,912 | 5,113 | |||
| Shareholders’ equity: | |||||
| Common shares, 0.01 par value | 39 | 38 | |||
| Additional paid-in capital | 11,712 | 11,370 | |||
| Retained earnings/( Deficit) | (1,111 | ) | (1,233 | ) | |
| Accumulated other comprehensive (loss)/income | (29 | ) | (35 | ) | |
| Treasury shares, at cost – 5,049 shares as of December 31, 2019; and March 31, 2019 respectively | (14 | ) | (14 | ) | |
| Non-controlling interest | 39 | 11 | |||
| Total Highway Holdings Limited shareholders’ equity | 10,636 | 10,137 | |||
| Total liabilities and shareholders’ equity | 16,548 | $ | 15,250 |
All values are in US Dollars.