Plastec Technologies Reports 2016 Third Quarter And Nine-Month Financial Results

Plastec Technologies, Ltd. - (OTCBB:PLTYF), (the "Company"), today reported unaudited financial results for fiscal 2016 third quarter and nine-month ended September 30, 2016. 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.

Closing of Share Transfer Agreement with Shanghai Yongli

On October 11, 2016, the Company announced the closing of its previously announced Share Transfer Agreement ("Agreement") with Shanghai Yongli Belting Co., Ltd. ("SYB") and its wholly-owned subsidiary, Shanghai Yongjing Investment Management Co., Ltd.. As a result, the Company no longer owns Plastec International Holdings Limited ("Plastec") or its integrated plastic manufacturing operations.

As a result of the closing occurring subsequent to quarter end, the Company's third quarter and nine-month financial and operating highlights still represent that of the Company's previously owned integrated plastic manufacturing service business in the People's Republic of China and Thailand through its wholly owned subsidiaries.

Financial and Operating Highlights for the Three Months Ended September 30, 2016

(All comparisons to prior year)
  • Sales of $50.6 million, an increase of 9.3% compared to $46.2 million
  • Gross margin of 27.5% decreased from 28.7%
  • Adjusted EBITDA of $10.3 million, an increase of 4.2% compared to $9.8 million
  • Net income of $6.0 million, or $0.46 per diluted share based on 12.9 million diluted shares outstanding, compared to $6.5 million, or $0.50 per diluted share based on 12.9 million diluted shares outstanding

Fiscal 2016 Nine-Month Financial and Operating Highlights

(All comparisons to same period of prior year)
  • Sales of $137.6 million, an increase of 9.9% compared to $125.2 million
  • Gross margin of 28.4%, compared to 25.3%
  • Adjusted EBITDA of $31.4 million, increased 24.5% from $25.2 million
  • Net income of $20 million, or $1.54 per diluted share based on 12.9 million diluted shares outstanding, increased 38% from $14.5 million, or $1.12 per diluted share based on 12.9 million diluted shares outstanding
  • $26.9 million in income generated from operations for the nine months ended September 30, 2016, compared to $21.8 million

Declaration of Special Dividend to Shareholders

In connection with the Agreement and following receipt of the initial portion of the Transfer Price, the Company's Board of Directors declared a special cash dividend of US$8.00 on each outstanding ordinary share. The special cash dividend was paid on or about November 1, 2016 to shareholders of record as of October 25, 2016.

Including this special cash dividend, the Company has distributed approximately US$9.80 per ordinary share in dividends in aggregate as a measure of rewarding shareholders for their continued support since 2014.

Management Comments

Mr. Kin Sun Sze-To, Chairman of the Company, stated, "We were pleased to compete the transaction with SYB last month, while also paying a special dividend to our shareholders as part of the transaction. We are now operating as a holding company while we continue to fulfill our obligations post-transaction and evaluating potential opportunities for future upside."

Selected Financial Highlights in USD ($ in millions, except number of shares and per share data)
   

3 months ended September 30, 2016
   

3 months ended September 30, 2015
   

Percentage Change
   

9 months ended September 30, 2016
   

9 months ended September 30, 2015
   

Percentage Change
Sales 50,564 46,245 9.3% 137,633 125,181 9.9%
Cost of Revenues 36,677 32,981 11.2% 98,478 93,483 5.3%
Gross Profit 13,887 13,264 4.7% 39,155 31,699 23.5%
Gross Profit Margin 27.5% 28.7% -1.2pts 28.4% 25.3% 3.1pts
 
Income from Operations 8,140 7,062 15.3% 24,179 16,402 47.4%
Operating Margin 16.1% 15.3% 0.8pts 17.6% 13.1% 4.5pts
 
Net Income 5,951 6,469 -8.0% 19,987 14,479 38.0%
Net Margin 11.8% 14.0% -2.2pts 14.5% 11.6% 2.9pts
 
Weighted Average Number of Diluted Ordinary Shares Outstanding 12,938,128 12,938,128 12,938,128 12,938,128
Diluted EPS $0.46 $0.50 -8.0% $1.54 $1.12 38.0%
Adjusted EBITDA*     10,251     9,843     4.2%     31,426     25,240     24.5%

* Reconciliation table at end of release
 
Balance Sheet Highlights (USD in Millions)
    9/30/2016     12/31/2015     Percentage Change
Cash and Cash Equivalents $207.5 $60.9 240.5%
Total Current Assets $273.9 $119.8 128.6%
Total Assets $316.5 $167.0 89.5%
Working Capital $92.3 $73.4 25.8%
Total Liabilities $181.5 $46.4 291.0%
Shareholders' Equity $135.0 $120.6 11.9%
Total Liabilities and Shareholders' Equity $316.5 $167.0 89.5%
 

2016 Third Quarter and First Nine Months Financial Review
  • Total sales for three months ended September 30, 2016 increased to $50.6 million from $46.2 million in the prior-year period. Total sales for the nine months period ended September 30, 2015 were $137.6 million, compared to $125.2 million in the corresponding period in the prior year.
  • The Company's gross profit increased 4.7% from $13.3 million to $13.9 million during the third quarter ended September 30, 2016, and gross profit margin decreased to 27.5% from 28.7% for the prior-year period. For the nine months period ended September 30, 2016, the Company's gross profit increased 23.5% from $31.7 million, or 25.3% of revenues, to $39.2 million, or 28.4% of revenues, in the prior year period.
  • Income from operations increased to $8.1 million, or 16.1% of revenues, during the third quarter ended September 30, 2016, compared $7.1 million, or 15.3% of revenues, in the prior-year period. For the nine months period, income from operations increased to $24.2 million, or 17.6% of the revenues, compared to $16.4 million, or 13.1% of the revenues for the prior-year period.
  • Net income for the third quarter ended September 30, 2016 decreased to $6.0 million or $0.46 per share based on approximately 12.9 million weighted average diluted shares outstanding, compared to $6.5 million or $0.50 per share based on approximately 12.9 million weighted average diluted shares, in the prior-year period. For the first nine months of 2016, the Company's net income increased to $20 million, or $1.54 per share based on 12.9 million weighted average shares outstanding, compared to $14.5 million, or $1.12 per share based on 12.9 million weighted average shares outstanding, in the prior-year period.
  • Adjusted EBITDA for the three months ended September 30, 2016 was $10.3 million, compared to $9.8 million in the prior-year period. For the first nine months of 2016, adjusted EBITDA was $31.4 million, compared to $25.2 million in the prior-year period.

Current Status of Plastec Technologies, Ltd.

The Company intends to maintain its reporting status with the U.S. Securities and Exchange Commission following the closing of the transactions contemplated by the Agreement.

The Company's continuing operations will consist of:

  • completing the construction of its manufacturing plant in Kai Ping, China, which is intended to be disposed of to SYB prior to its official operation at a price equivalent to the capital used for its construction, subject to terms and specifics to be agreed upon by the parties concerned in due course;
  • collecting rental income from certain property the Company owns and that is being leased to one of Plastec's subsidiaries;
  • collect any payments we may receive upon Plastec achieving the performance targets for the years ended December 31, 2016, 2017 and 2018 as described in the Agreement; and
  • to explore other investment opportunities.

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,
2016   2015 2016   2015
HK$   HK$ HK$   HK$
 
 
Revenues 394,400 360,712 1,073,536 976,415
Cost of revenues (286,084)   (257,249) (768,129)   (729,164)
Gross profit 108,316 103,463 305,407 247,251
 
Operating expenses, net
Selling, general and administrative expenses (48,771) (49,851) (124,449) (122,646)
Other income 2,551 618 5,899 1,305
Written-off of property, plant and equipment - (858) - (2,119)
Gain on disposal of property, plant and equipment 1,394   1,712 1,742   4,142
Total operating expenses, net (44,826)   (48,379) (116,808)   (119,318)
 
Income from operations 63,490 55,084 188,599 127,933
 
Interest income 203 204 873 1,139
Interest expense (173)   (338) (545)   (1,138)
Income before income tax expense 63,520 54,950 188,927 127,934
 
Income tax expense (17,106)   (4,494) (33,030)   (14,994)
Net income 46,414 50,456 155,897 112,940
 
Other comprehensive income
Foreign currency translation adjustment (4,184)   (6,184) (13,439)   (1,603)

Comprehensive income attributable to Plastec Technologies, Ltd.

42,230
 

44,272

142,458
 

111,337
 
Net income per share:
 

Weighted average number of ordinary shares
12,938,128   12,938,128 12,938,128   12,938,128
 

Weighted average number of diluted ordinary shares

12,938,128
 

12,938,128

12,938,128
 

12,938,128
 

Basic income per share attributable to Plastec Technologies, Ltd.

HK$3.6
 

HK$3.9

HK$12.0
 

HK$8.7
 

Diluted income per share attributable to Plastec Technologies, Ltd.

HK$3.6
 

HK$3.9

HK$12.0
 

HK$8.7
 
 

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,

2016
 

2015

HK$

HK$
 

ASSETS
 
Current assets
Cash and cash equivalents 1,618,834 475,361

Trade receivables, net of allowances for doubtful accounts of HK$nil, andHK$nil as of September 30, 2016 and December 31, 2015, respectively

352,187

303,681
Inventories 85,358 105,221
Bills receivable 37,304 5,782
Deposits, prepayment and other receivables   42,359   44,473
Total current assets 2,136,042 934,518
 
Property, plant and equipment, net 300,808 336,491
Prepaid lease payments, net 17,020 18,165
Deferred tax assets 14,486 13,260
Intangible assets   520   438
Total assets   2,468,876   1,302,872
 

LIABILITIES AND SHAREHOLDERS' EQUITY
 

Current liabilities
Bank borrowings 23,409 29,223
Trade payables 115,147 111,658
Other payables and accruals 1,193,237 152,095
Tax payable   84,214   69,210
Total current liabilities 1,416,007 362,186
 
Bank Borrowings   -   -
Total liabilities   1,416,007   362,186
 
Commitments and contingencies - -
 
Shareholders' equity

Ordinary shares (US$0.001 par value; 100,000,000 authorized12,938,128 and 12,938,128 shares issued and outstanding as ofSeptember 30, 2016 and December 31, 2015, respectively)

 

101

 

101
Additional paid-in capital 26,049 26,049
Accumulated other comprehensive income (5,840) 7,599
Retained earnings   1,032,559   906,937
Total shareholders' equity   1,052,869   940,686
       
Total liabilities and shareholders' equity   2,468,876   1,302,872
 
 

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,
2016   2015
HK$   HK$
Operating activities
Net income 155,897 112,940
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 64,161 72,265
Loss on written-off of property, plant and equipment - 2,119
Gain on disposal of property, plant and equipment (1,742) (4,142)
Deferred tax credit (1,225) (6,021)
Changes in operating assets and liabilities:
Trade receivables (42,746) (38,121)
Inventories 19,863 (10,474)
Deposits, prepayment and other receivables (26,055) (1,636)
Trade payables 3,489 9,770
Other payables and accruals 23,698 27,729
Tax payables 14,823   5,806
Net cash provided by operating activities 210,163   170,235
 
Investing activities
Purchase of property, plant and equipment (36,427) (106,321)
Purchase of intangible assets (82) -
Proceeds from disposal of property, plant and equipment 1,906 8,289
Proceeds related to disposal of a subsidiary 1,017,442   -
Net cash used in investing activities 982,839   (98,032)
 
Financing activities
Net (repayment)/proceeds from bank borrowings (5,815) 8,258
Dividends paid (30,275)   (121,100)
Net cash used in financing activities (36,090)   (112,842)
 
 
Net increase/(decrease) in cash and cash equivalents 1,156,912 (40,639)
 
Effect of exchange rate changes on cash and cash equivalents (13,439) (1,603)
 
Cash and cash equivalents, beginning of period 475,361   528,527
Cash and cash equivalents, end of period 1,618,834   486,285
 
Supplementary disclosures of cash flow information:
Interest received, net 328   1
Income taxes paid (19,433)   (15,210)
 
 

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)
 
  Three Months Ended   Nine Months Ended
September 30, September 30,
2016   2015 2016   2015
HKD HKD HKD HKD
Net Income (note) 42.469 48,984 148,256 109,612
 
Plus Interest expenses 173 338 545 1,138
Minus Interest income (203) (204) (873) (1,139)
Plus Income tax expenses 17,106 4,494 33,030 14,994
           
Income from operations 59,545 53,612 180,958 124,605
 
Plus Depreciation and Amortization 20,414 23,160 64,161 72,265
           
Adjusted EBITDA 79,959   76,772 245,119   196,870
 
Note: Excl. other income 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. The Company believes that the presentation of such financial information provides more useful information to investors as it indicates more clearly the Company's future performance. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization.

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