SHENZHEN, China, May 12 /PRNewswire-FirstCall/ -- Nam Tai Electronics, Inc. ('Nam Tai' or the 'Company') (NYSE: NTE) today announced its unaudited results for the first quarter ended March 31, 2009.
KEY HIGHLIGHTS
(In thousands of US Dollars, except per share data, percentages and as
otherwise stated)
Quarterly Results (Unaudited)
Q1 2009 Q1 2008 YoY(%)
Net sales $102,150 $147,129 (30.6)
Gross profit $7,122 $19,530 (63.5)
% of sales 7.0% 13.3% -
Operating (loss) income (a) ($6,539) $7,812 (183.7)
% of sales (6.4%) 5.3% -
per share (diluted) ($0.14) $0.17 (182.4)
Net (loss) income attributable to
Nam Tai shareholders (a) ($3,881) $28,366 (113.7)
% of sales (3.8%) 19.3% -
Basic (loss) earnings per share ($0.09) $0.63 (114.3)
Diluted (loss) earnings per share ($0.09) $0.63 (114.3)
Weighted average number of shares ('000)
Basic 44,804 44,804 -
Diluted 44,804 44,804 -
Note:
(a) Operating loss and net loss for the first quarter of 2009 included
$5.1 million of employee severance benefits in PRC subsidiaries.
In addition to disclosing results determined in accordance with accounting principles generally accepted in the United States ('US GAAP') as set forth in the table above, management utilizes a measure of operating income/(loss), net income/(loss) and earnings (loss) per share on a non-GAAP basis that excludes certain income and expenses to better assess operating performance. Those non-GAAP financial measures exclude certain items, such as share-based compensation expenses and infrequent or unusual items such as gain on sale of shares of a subsidiary and employee severance benefits in PRC subsidiaries. By disclosing the non-GAAP information, management intends to provide investors with additional information to analyze the Company's performance, core results and underlying trends. Non-GAAP information is not determined using US GAAP; therefore, the information is not necessarily comparable to other companies and should not be used to compare the Company's performance over different periods. Non-GAAP information should not be viewed as a substitute for, or superior to, net income or other financial data prepared in accordance with US GAAP as measures of our operating results or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made. See the table below for a reconciliation of non-GAAP amounts to amounts reported under US GAAP.
GAAP TO NON-GAAP RECONCILIATION
(In millions of US Dollars, except for per share (diluted) and numbers
of shares)
Three months ended
March 31,
2009 2008
per per
share share
millions (diluted) millions (diluted)
GAAP Operating (Loss) Income ($6.5) ($0.14) $7.8 $0.17
Add back/(Less):
- Share-based
compensation expenses (a) - - 1.0 0.02
- Employee severance benefits
in PRC subsidiaries (b) 5.1 0.11 - -
Non-GAAP Operating (Loss) Income ($1.4) ($0.03) $8.8 $0.19
GAAP Net (Loss) Income
attributable to Nam Tai
shareholders ($3.9) ($0.09) $28.4 $0.63
Add back/(Less):
- Share-based compensation
expenses (a) - - 1.0 0.02
- Employee severance
benefits in PRC subsidiaries
(after deducting tax and
sharing with noncontrolling
interest) (b) 3.2 0.07 - -
- Gain on sale of shares
of a subsidiary (c) - - (20.2) (0.45)
Non-GAAP Net (Loss) Income
attributable to Nam Tai
shareholders ($0.7) ($0.02) $9.2 $0.20
Weighted average number of
shares - diluted ('000) 44,804 44,804
Note:
(a) The share-based compensation expenses were mainly in relation to
options to purchase approximately 20 million share granted by the
Company's Hong Kong Stock Exchange listed subsidiary, Nam Tai
Electronic & Electrical Products Limited ('NTEEP')(Stock Code: 2633),
to certain of its directors and employees in the first quarter of
2008. In December 2008, NTEEP repurchased and cancelled all of its
outstanding 17,440,000 options from the option holders at a total
consideration of approximately $42,000. Accordingly, Nam Tai recorded
no share-based compensation expense during the three months ended
March 31, 2009.
(b) The expense represents employee benefit and severance arrangements in
accordance with the PRC statutory severance requirements.
(c) On March 4, 2008, Nam Tai completed the sale of its entire equity
interest in J.I.C. Technology Company Limited ('JIC'), a Hong Kong
Stock Exchange listed subsidiary (Stock Code: 00987), to an
independent third party. In this transaction, Nam Tai sold
572,594,978 shares of JIC, representing 74.99% of its outstanding
share capital for cash of approximately $51 million, which resulted
in a gain on disposal of approximately $20 million.
SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FIRST QUARTER OF 2009
1. Quarterly Sales Breakdown
(In thousands of US Dollars, except percentage information)
YoY(%)
YoY(%) (Quarterly
Quarter 2009 2008 (Quarterly) accumulated)
1st Quarter 102,150 147,129 (30.6) (30.6)
2nd Quarter - 146,168
3rd Quarter - 160,534
4th Quarter - 169,021
Total 102,150 622,852
2. Breakdown of Net Sales by Product Segment (as a percentage of Total
Net Sales)
2009 2008
Segments Q1 (%) Q1 (%)
Consumer Electronic and Communication Products ('CECP') 35% 48%
Telecommunication Component Assembly ('TCA') 52% 40%
Liquid Crystal Display Products ('LCDP') 13% 12%
100% 100%
3. Key Highlights of Financial Position
As at March 31, As at December 31,
2009 2008 2008
Cash on hand (a) $230.2 million $267.2 million $237.0 million
Ratio of cash (a) to
current liabilities 2.73 2.32 1.66
Current ratio 3.79 3.42 2.67
Ratio of total assets to
total liabilities 5.28 4.49 3.58
Return on Nam Tai
shareholders' equity (4.8%) 33.4% 9.4%
Ratio of total liabilities
to total equity 0.23 0.29 0.39
Debtors turnover 52 days 56 days 61 days
Inventory turnover 16 days 20 days 18 days
Average payable period 53 days 56 days 65 days
Note: (a) Includes cash equivalents.
MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Operations Review
Sales in the first quarter of 2009 were $102.2 million, a decrease of 30.6% as compared to sales of $147.1 million in the same quarter of 2008. Sales in our TCA segment for the first quarter of 2009 decreased by 11.1% as compared to the same quarter of 2008 mainly because of the decline in sales of flexible printed circuit, or FPC, sub-assemblies. Sales in our LCDP segment and CECP segment also dropped by 25.3% and 48.5%, respectively, during the first quarter of 2009 as compared to sales in such segments in the corresponding quarter of 2008. The decrease in sales in LCDP segment was principally a consequence of the decline in sales of LCD panels and our decision to reject an order with very thin margins. Sales in our CECP segment declined significantly because of the continuing effect of the ongoing global economic downturn. The weak demand for end products in the consumer market adversely affected our sales of all products including mobile phone accessories, which principally represented sales of our headsets containing Bluetooth(R) (1) wireless technology, educational products, optical products and home entertainment devices.
The Company's gross profit margin in the first quarter of 2009 was 7.0% as compared to 13.3% in the first quarter of 2008, primarily resulting from the decline in sales. The lower margin was also caused by a shift of product mix where higher margin products in our CECP segment accounted for only 35% of sales in the first quarter of 2009, but 48% of sales in the first quarter of 2008. Gross profit in the first quarter of 2009 was $7.1 million, a decrease of 63.5% as compared to $19.5 million in the first quarter of 2008.
Net loss attributable to Nam Tai shareholders in the first quarter of 2009 was $3.9 million, which principally resulted from $3.2 million associated with employee severance benefit expenses incurred in our PRC subsidiaries, as compared to net income of $28.4 million reported in the first quarter of 2008. The $3.2 million in employee severance benefit expenses we incurred in the three months ended March 31, 2009 were net of income taxes and amounts attributable to the noncontrolling interest of Nam Tai Electronic & Electrical Products Limited, or NTEEP, our Hong Kong Stock Exchange-listed subsidiary (Stock Code: 2633), in which we hold 74.88% of the issued share capital. The net income we reported in the first quarter of 2008 was principally the result of a $20.2 million gain on the sale of our entire equity interest in J.I.C. Technology Company Limited. Basic and diluted loss per share in the first quarter of 2009 were $0.09 per share, as compared to basic and diluted earnings per share of $0.63 in the first quarter of 2008.
Non-GAAP Financial Information
Non-GAAP operating loss for the first quarter of 2009 was $1.4 million, or $0.03 per share (diluted), compared to non-GAAP operating income of $8.8 million, or $0.19 per share (diluted), in the first quarter of 2008. Non-GAAP net loss attributable to Nam Tai shareholders for the first quarter of 2009 (a rare quarterly loss since the Company's IPO, a span of about 20 years) decreased to $0.7 million, or $0.02 per share (diluted), compared to income of $9.2 million, or $0.20 per share (diluted), in the first quarter of 2008.
(1) The Bluetooth(R) word mark and logo are owned by the Bluetooth SIG, Inc. and any use of such mark by Nam Tai is under license.
Liquidity and Financial Resources
Despite current economic conditions, Nam Tai's financial position remained strong with $230.2 million cash on hand at March 31, 2009, of which $95.3 million was held by NTEEP and its subsidiaries. Net cash provided by operating activities in the current first quarter was $13.2 million. During the first quarter of 2009, the Company incurred capital expenditures of $11.2 million and paid cash dividends for the last quarter of 2008 of $9.9 million to shareholders. On February 9, 2009, we announced that we do not intend to declare dividends in 2009 in order to maintain stronger cash reserves in view of the uncertainty caused by the global economic downturn.
Nam Tai's cash on hand has been invested in term deposits with HSBC and China Construction Bank, generating minimal income in the current environment that offers low interest rates on such deposits. We have not yet found better investments for our cash in excess of amounts needed to fund ongoing operations that offer quality, safety and the potential for higher returns.
The Company continues to exercise rigorous corporate governance and control policies and is not involved in trading of any debt securities or financial derivative products.
EXPANSION PROJECTS
During the first quarter of 2009, we expended approximately $11 million on our ongoing expansion project in Wuxi near the East Coast of China, approximately 80 miles Northwest of Shanghai. Construction of our new facility in Wuxi is nearing completion and we expect that it will be available for mass production of FPC boards, FPC subassemblies and other products by the fourth quarter of 2009.
Because of the current economic global downturn, we previously announced plans to postpone construction, until at least mid-2009 or later, of two other new manufacturing facilities, one in the Shenzhen Guangming Hi-Tech Industrial Park and the other on a second parcel we hold in Wuxi. We are now considering the indefinite postponement or termination of the second Wuxi expansion project, combining the operations we contemplated for that second Wuxi facility into the first facility that is nearing completion. We also plan to explore the feasibility of returning the second Wuxi parcel to the Wuxi government. This revision of our expansion projects will permit us, at the appropriate time, to concentrate our resources on the construction of new facilities in Shenzhen Guangming for future growth when business conditions recover.
EFFORTS TO PRIVATIZE NTEEP
In February 2009, Nam Tai announced its intent to seek to privatize NTEEP by making a cash offer aggregating approximately $43 million for the shares of NTEEP it did not own (the 'Offer Shares').
