HIGHWAY HOLDINGS RESTATES UNAUDITED FINANCIAL STATEMENTS FOR 3 AND 9 MONTHS ENDED DECEMBER 31, 2023 RESULTING IN HIGHER NET INCOME FOR BOTH PERIODS
Highway Holdings (NASDAQ: HIHO) announced the restatement of its unaudited financial statements for the quarters ending December 31, 2023, due to a revenue recognition error caused by a change in a customer's inventory procedures. The adjustment includes removing $1.875 million in net sales and $1.921 million in cost of sales, identified during the preparation of the annual report for the fiscal year ending March 31, 2024.
Despite the adjustments, net income has increased: for Q3 of fiscal 2024, it rose from $302,000 ($0.07 per diluted share) to $348,000 ($0.08 per diluted share), and for the first nine months, it increased from $177,000 ($0.04 per diluted share) to $223,000 ($0.05 per diluted share).
The announcement reflects the company's dedication to maintaining financial accuracy and integrity.
- Net income for Q3 of fiscal 2024 increased from $302,000 to $348,000.
- Net income for the first nine months of fiscal 2024 increased from $177,000 to $223,000.
- Restatement due to a revenue recognition error related to customer inventory fulfillment changes.
- Adjustment required removal of $1.875 million in net sales.
- Adjustment required removal of $1.921 million in cost of sales.
- Investors should no longer rely on previously released financial statements.
Insights
The restatement of financial statements is a significant event for Highway Holdings, as it directly impacts the perceived financial health and transparency of the company. The correction in revenue recognition due to a misapplied accounting standard highlights the importance of accurate financial reporting. Although the net income has increased slightly for both the three and nine-month periods ended December 31, 2023, the essential focus for investors should be on the underlying reasons for restatement. The misapplication suggests previous oversight in financial controls, which can be a red flag for some investors.
However, the company's proactive stance in identifying and correcting the issue, along with its commitment to uphold high standards of financial reporting, may reassure investors about the management's diligence. In the short term, restatements can cause volatility in stock prices as they often trigger uncertainty. Long-term investors might view this as a positive, given the company's efforts to rectify and clarify its financial standing.
It's also worth noting that even though the higher net income might appear beneficial, the core of the issue—revenue recognition—should be scrutinized. Investors should monitor future financial statements closely to ensure no recurring issues and see how the company strengthens its financial oversight mechanisms.
From an accounting perspective, the revision of Highway Holdings' financial statements due to incorrect revenue recognition practices showcases the complexities and strict compliance required with accounting standards. Specifically, the adjustments were necessary because of changes in inventory fulfillment and transfer procedures by one of the company's customers, leading to an erroneous inclusion of $1,875,000 in net sales and $1,921,000 in cost of sales. This restatement serves as a critical reminder of the importance of matching revenues and expenses accurately, in accordance with the applicable accounting frameworks.
For retail investors, it is important to understand that while accounting adjustments may lead to improved net income figures, they often reflect prior inaccuracies. The increased net income for both periods, albeit minor, indicates that the company is now more accurately reflecting its financial performance. However, investors should be vigilant about the potential recurrence of such issues, as they could indicate systematic weaknesses in financial reporting practices.
Additionally, these restatements could involve additional scrutiny from regulators or auditors, which might impact the company's operational focus and finances. Investors should look out for any further updates or changes that the company may implement in its accounting and reporting procedures.
Investors should no longer rely upon the previously released financial statements cited above. Similarly, any other press releases and investor communications containing information derived from such financial statements should no longer be relied upon.
The Company has concluded that the interim financial statements cannot be relied upon due to the misapplication of a revenue recognition accounting standard following a change in inventory fulfillment and transfer procedures by one of the Company's customers. The inventory adjustment resulted in the erroneous inclusion of
The adjustments to net sales and other line items resulting from the changed inventory transfer policies resulted in an increase in net income for the third quarter of fiscal year 2024 from
Today's announcement reiterates Highway Holdings' continued commitment to improve its practices and uphold the highest standards of financial reporting.
About Highway Holdings
Highway Holdings is an international manufacturer of a wide variety of quality parts and products for blue chip equipment manufacturers based primarily in Germany. Highway Holdings' administrative offices are located in
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 economic, competitive, governmental, political and technological factors affecting the company's revenues, operations, markets, products and prices, the impact of the worldwide COVID-19 pandemic, 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, | |||||||||
2023 Announced | 2023 Restated | 2023 Announced | 2023 Restated | |||||||
Net sales | ||||||||||
Cost of sales | 3,231 | 1,310 | 5,140 | 3,219 | ||||||
Gross profit | 876 | 922 | 1,636 | 1,682 | ||||||
Selling, general and administrative expenses | 679 | 679 | 1,728 | 1,728 | ||||||
Operating income/(loss) | 197 | 243 | (92) | (46) | ||||||
Non-operating items | ||||||||||
Exchange gain /(loss), net | 27 | 27 | 58 | 58 | ||||||
Interest income | 63 | 63 | 156 | 156 | ||||||
Gain/(Loss) on disposal of Asset | 3 | 3 | 16 | 16 | ||||||
Other income/(expenses) | 8 | 8 | 14 | 14 | ||||||
Total non-operating income/ (expenses) | 101 | 101 | 244 | 244 | ||||||
Net income before income tax and non-controlling interests | 298 | 344 | 152 | 198 | ||||||
Income taxes | 1 | 1 | 7 | 7 | ||||||
Net income before non-controlling interests | 299 | 345 | 159 | 205 | ||||||
Net loss attributable to non-controlling interests | 3 | 3 | 18 | 18 | ||||||
Net income attributable to Highway Holdings Limited's shareholders |
302 |
348 |
177 |
223 | ||||||
Net Gain/ (loss) per share – Basic
| ||||||||||
Net Gain/ (loss) per share - Diluted |
|
| ||||||||
Weighted average number of shares outstanding | ||||||||||
Basic | 4,386 | 4,386 | 4,314 | 4,314 | ||||||
Diluted |
4,396 |
4,396 |
4,323 |
4,323 | ||||||
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES | |||
Consolidated Balance Sheet | |||
(Dollars in thousands, except per share data) | |||
Dec 31 | Dec 31 | ||
2023 Announced | 2023 Restated | ||
Current assets: | |||
Cash and cash equivalents | |||
Accounts receivable, net of doubtful accounts | 3,533 | 1,658 | |
Inventories | 1,812 | 1,858 | |
Prepaid expenses and other current assets | 200 | 200 | |
Income tax recoverable | - | - | |
Total current assets | 11,731 | 9,902 | |
Property, plant and equipment, (net) | 379 | 379 | |
Operating lease right-of-use assets | 2,004 | 2,004 | |
Long-term deposits | 205 | 205 | |
Long-term loan receivable | 95 | 95 | |
Investments in equity method investees | - | - | |
Total assets | |||
Current liabilities: | |||
Accounts payable | |||
Operating lease liabilities, current | 586 | 586 | |
Other liabilities and accrued expenses | 1,845 | 1,845 | |
Income tax payable | 551 | 551 | |
Dividend payable | 46 | 46 | |
Total current liabilities | 5,505 | 3,630 | |
Long term liabilities: | |||
Operating lease liabilities, non-current | 1,013 | 1,013 | |
Deferred income taxes | 98 | 98 | |
Long terms accrued expenses | 17 | 17 | |
Total liabilities | 6,633 | 4,758 | |
Shareholders' equity: | |||
Preferred shares, | - | - | |
Common shares, | 44 | 44 | |
Additional paid-in capital | 12,140 | 12,140 | |
Accumulated deficit | (3,879) | (3,833) | |
Accumulated other comprehensive income/(loss) | (517) | (517) | |
Non-controlling interest | (7) | (7) | |
Total shareholders' equity | 7,781 | 7,827 | |
Total liabilities and shareholders' equity | |||
View original content:SOURCE Highway Holdings Limited
FAQ
Why did Highway Holdings restate its financial statements for Q3 and the first nine months ended December 31, 2023?
How did the restatement affect Highway Holdings' net income for Q3 of fiscal 2024?
What was the impact on Highway Holdings' net income for the first nine months of fiscal 2024 after the restatement?
What financial adjustments were made in Highway Holdings' restated financial statements?
Should investors rely on the previously released financial statements of Highway Holdings for Q3 and the first nine months ended December 31, 2023?
