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Nam Tai Electronics, Inc.: Q3 2009 Sales down 31.2%, Gross profit margin at 11.4%
SHENZHEN, China, Nov. 2 /PRNewswire-FirstCall/ -- Nam Tai Electronics, Inc. ("Nam Tai" or the "Company") (NYSE: NTE) today announced its unaudited results for the third quarter ended September 30, 2009.
KEY HIGHLIGHTS
(In thousands of US Dollars, except per share data, percentages and as otherwise stated)
Quarterly Results Nine Months Results
----------------- -------------------
Q3 2009 Q3 2008 YoY(%) 9M 2009 9M 2008 YoY(%)
-------- -------- ----- -------- -------- -----
Net sales $110,416 $160,534 (31.2) $314,402 $453,831 (30.7)
--------- -------- -------- ----- -------- -------- -----
Gross profit $12,614 $15,738 (19.9) 30,158 $56,030 (46.2)
------------ ------- ------- ----- ------ ------- -----
% of sales 11.4% 9.8% - 9.6% 12.3% -
---------- ---- --- --- --- ---- ---
Operating income
(loss)(a) $4,810 $4,421 8.8 $(304) $20,841 (101.5)
---------------- ------ ------ --- ----- ------- ------
% of sales 4.4% 2.8% - (0.1%) 4.6% -
---------- --- --- --- ----- --- ---
per share
(diluted) $0.11 $0.10 10.0 ($0.01) $0.47 (102.1)
---------- ----- ----- ---- ------ ----- ------
Net income
attributable to
Nam Tai
shareholders(a) (b) $4,504 $4,912 (8.3) $1,236 $45,082 (97.3)
---------------- ------ ------ ---- ------ ------- -----
% of sales 4.1% 3.1% - 0.4% 9.9% -
---------- --- --- ---- --- --- ----
Basic earnings per
share $0.10 $0.11 (9.1) $0.03 $1.01 (97.0)
------------------ ----- ----- ---- ----- ----- -----
Diluted earnings
per share $0.10 $0.11 (9.1) $0.03 $1.01 (97.0)
---------------- ----- ----- ---- ----- ----- -----
Weighted average
number of shares
('000)
Basic 44,804 44,804 - 44,804 44,804 -
Diluted 44,813 44,806 - 44,808 44,806 -
------- ------ ------ ----- ------ ------ ------
Note:
(a) Operating loss and net income for the nine months ended September 30,
2009 included $5.1 million of employee severance benefits in PRC
subsidiaries.
(b) For the nine months ended September 30, 2008, net income included
$20.2 million of gain on disposal of Namtek business in J.I.C.
Technology Company Limited ("JIC").
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, employee severance benefits in PRC subsidiaries and other income recovered from Tele-Art Inc. (in liquidation). 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
September 30,
-------------
2009 2008
---- ----
per per
share share
millions (diluted) millions (diluted)
------------------------- -------- ------- -------- -------
GAAP Operating Income (Loss) $4.8 $0.11 $4.4 $0.10
--------------------- ---- ----- ---- -----
Add back:
- Share-based
compensation expenses(a) - - - -
--------------------------- --- --- ---- ---
- Professional expenses in
relation to privatization
of NTEEP - - - -
-------------------------- --- --- ---- ---
- Employee severance
benefits in PRC
subsidiaries (b) - - - -
------------------------- --- --- ---- ---
Non-GAAP Operating Income $4.8 $0.11 $4.4 $0.10
------------------------- ==== ===== ==== =====
GAAP Net Income (Loss)
attributable to Nam Tai
shareholders $4.5 $0.10 $4.9 $0.11
------------------------ ---- ----- ---- -----
Add back/(Less):
- Share-based
compensation expenses(a) - - - -
--------------------------- --- --- ---- ---
- Professional expenses in
relation to privatization
of NTEEP - - - -
-------------------------- --- --- ---- ---
- Employee severance
benefits in PRC
subsidiaries (after
deducting tax and sharing
with noncontrolling
interest) (b) - - - -
-------------------------- --- --- ---- ---
- Gain on sale of
subsidiaries' shares (c) - - - -
------------------------- --- --- ---- ---
- Other income
recovered from Tele-Art
Inc. (in liquidation)(d) - - - -
-------------------------- --- --- ---- ---
Non-GAAP Net Income
attributable to Nam Tai
shareholders $4.5 $0.10 $4.9 $0.11
------------------------- ==== ===== ==== =====
Weighted average number of
shares - diluted ('000) 44,813 44,806
-------------------------- ------ ------
Nine months ended
September 30,
-------------
2009 2008
---- ----
per per
share share
millions (diluted) millions (diluted)
------------------------- -------- ------- -------- -------
GAAP Operating Income (Loss) $(0.3) $(0.01) $20.8 $0.47
--------------------- ----- ------ ----- -----
Add back:
- Share-based
compensation expenses(a) 0.1 - 1.2 0.03
--------------------------- --- --- --- ----
- Professional expenses in
relation to privatization
of NTEEP 0.9 0.02 - -
-------------------------- --- ---- --- ---
- Employee severance
benefits in PRC
subsidiaries (b) 5.1 0.11 - -
------------------------- --- ---- --- ---
Non-GAAP Operating Income $5.8 $0.12 $22.0 $0.50
------------------------- ==== ===== ===== =====
GAAP Net Income (Loss)
attributable to Nam Tai
shareholders $1.2 $0.03 $45.1 $1.01
------------------------ ---- ----- ----- -----
Add back/(Less):
- Share-based
compensation expenses(a) 0.1 - 1.2 0.03
--------------------------- --- --- --- ----
- Professional expenses in
relation to privatization
of NTEEP 0.9 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
subsidiaries' shares (c) - - (20.2) (0.45)
------------------------- --- --- ----- -----
- Other income
recovered from Tele-Art
Inc. (in liquidation)(d) - - (2.9) (0.07)
-------------------------- --- --- ---- -----
Non-GAAP Net Income
attributable to Nam Tai
shareholders $5.4 $0.12 $23.2 $0.52
------------------------- ==== ===== ===== =====
Weighted average number of
shares - diluted ('000) 44,808 44,806
-------------------------- ------ ------
Note:
(a) The share-based compensation expenses included approximately $0.1
million attributable to options to purchase 75,000 shares granted in
the second quarter of 2009 ($0.2 million for year 2008 to directors in
accordance with the Company's practice of making annual option grants
to its directors upon their election for the ensuing year and
approximately $1.0 million principally attributable to options to
purchase approximately 20 million shares 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 executive 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 (relating to NTEEP) during the
three ended September 30, 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 of Namtek business in 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.
(d) A total amount of approximately $2.9 million of other income in the
Company's financial statements for the second quarter of 2008. This
amount represents Nam Tai's share of proceeds realized from the
disposal for the account of Tele-Art, Inc.'s liquidator of 477,319 Nam
Tai shares owned by Tele-Art, Inc. (in liquidation)("Tele-Art") and
was paid in settlement of amounts previously funded by Nam Tai in
connection with Tele-Art's liquidation and in partial satisfaction of
judgments in favor of Nam Tai against Tele-Art.
SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE THIRD 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 101,836 146,168 (30.3) (30.5)
--------- ------- ------- ----- -----
3rd
Quarter 110,416 160,534 (31.2) (30.7)
--------- ------- ------- ----- -----
4th
Quarter - 169,021
--------- --- -------
Total 314,402 622,852
----- ------- -------
2. Breakdown of Net Sales by Product Segment (as a percentage of
Total Net Sales)
2009 2008
---- ----
Segments Q3(%) YTD(%) Q3(%) YTD(%)
-------- ---- ----- ---- -----
Consumer Electronic
and Communication
Products ("CECP") 26% 29% 41% 46%
------------------- -- -- -- --
Telecommunication
Component Assembly
("TCA") 56% 55% 45% 41%
------------------- -- -- -- --
Liquid Crystal
Display Products
("LCDP") 18% 16% 14% 13%
----------------- -- -- -- --
100% 100% 100% 100%
--- --- --- ---
3. Key Highlights of Financial Position
As at
As at September 30, December
31,
2009 2008 2008
---- ---- ----
Cash on hand (a) $189.6 million $250.5 million $237.0 million
----------- -------------- -------------- --------------
Ratio of
cash (a) to
current
liabilities 2.26 1.61 1.66
------------ ---- ---- ----
Current ratio 3.35 2.69 2.67
------------- ---- ---- ----
Ratio of total
assets to
total
liabilities 4.86 3.52 3.58
-------------- ---- ---- ----
Return on Nam
Tai
shareholders'
equity 0.5% 17.8% 9.4%
-------------- --- ---- ---
Ratio of total
liabilities to
total equity 0.26 0.45 0.39
--------------- ---- ---- ----
Debtors
turnover 63 days 75 days 61 days
--------- ------- ------- -------
Inventory
turnover 14 days 23 days 18 days
--------- ------- ------- -------
Average payable
period 62 days 81 days 65 days
--------------- ------- ------- -------
Note: (a) Includes cash equivalents.
THIRD QUARTER REVIEW
The business environment in Nam Tai's product sectors remains difficult and extremely competitive. Sales in the third quarter of 2009 were $110.4 million, a decrease of 31.2% as compared to sales of $160.5 million in the same quarter of 2008. Sales in our CECP segment, TCA segment and LCDP segment dropped by 57.3%, 14.8% and 7.6%, respectively, during the third quarter of 2009, as compared to same period in 2008. Sales in our CECP segment declined significantly mainly because of the continuing effect from the global economic downturn. The weak demand in the market for our consumer products adversely affected sales of all of our end-user products such as mobile phone accessories, which principally represented sales of our headsets containing Bluetooth®(1) wireless technology, educational products, optical products and home entertainment devices. Sales in our TCA segment and LCDP segment also declined as a consequence of the decline in sales of TCA and LCD panels.
The Company's gross profit margin in the third quarter of 2009 was 11.4% as compared to 9.8% in the third quarter of 2008. Gross profit in the third quarter of 2009 was $12.6 million, a decrease of 19.9%, as compared to $15.7 million in the third quarter of 2008, primarily resulting from the decrease in sales.
Net income attributable to Nam Tai shareholders in the third quarter of 2009 was $4.5 million, as compared to net income of $4.9 million in same quarter of 2008. Basic and diluted earnings per share in the third quarter of 2009 were $0.10 per share, as compared to basic and diluted earnings per share of $0.11 in the third quarter of 2008.
For the nine months ended September 30, 2009, our net sales were $314.4 million, a decrease of 30.7% as compared to $453.8 million in the same period last year. The Company's gross profit margin in the first nine months of 2009 was 9.6% as compared to 12.3% in the same period of 2008. Gross profit was $30.2 million, a decrease of 46.2%, as compared to $56.0 million in the same period last year. We reported an operating loss for the first nine months of 2009 of $0.3 million, compared to operating income of $20.8 million in the same period last year. Our net income attributable to Nam Tai shareholders for the nine months ended September 30, 2009 was $1.2 million, or $0.03 per share (diluted), as compared to net income attributable to Nam Tai shareholders of $45.1 million, or $1.01 per share (diluted), in the same period last year.
(1) The Bluetooth® word mark and logo are owned by the Bluetooth SIG, Inc. and any use of such mark by Nam Tai is under license.
Non-GAAP Financial Information
Non-GAAP operating income for the third quarter of 2009 was $4.8 million, or $0.11 per share (diluted), compared to non-GAAP operating income of $4.4 million, or $0.10 per share (diluted), in the third quarter of 2008. Non-GAAP net income attributable to Nam Tai shareholders for the third quarter of 2009 decreased to $4.5 million, or $0.10 per share (diluted), compared to income of $4.9 million, or $0.11 per share (diluted), in the third quarter of 2008.
Liquidity and Financial Resources
Despite current economic conditions, Nam Tai's financial position as at September 30, 2009 remained strong with $4.8 million net cash generated from operating activities during the third quarter and $189.6 million cash on hand, of which about $99.2 million was held by NTEEP and its subsidiaries, even after the payment of $7.1 million on capital expenditures. Had we completed the privatization of our subsidiary, NTEEP, as at September 30, 2009, our pro forma cash on hand on that date would have decreased to an estimated $187.8 million, which gives effect to our use of cash to pay the estimated aggregate cost to acquire the NTEEP shares that we did not already own. See the discussion of this privatization transaction below.
Nam Tai's cash on hand has been invested in term deposits with HSBC and China Construction Bank. 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 third quarter of 2009, we expended approximately $4 million mainly on our ongoing expansion project of FPC manufacturing plant in Wuxi near the east coast of China, approximately 80 miles northwest of Shanghai. After almost a year of construction, the facility was largely completed in the second quarter 2009. In the third quarter, manufacturing equipments were being set up and human resources were being recruited to operate the plant. Currently the team in Wuxi is preparing for customer audits and product qualifications. The mass production of FPC in the fourth quarter is expected to be on time.
As announced in the previous quarters, the second Wuxi and the Guangming projects are currently on hold indefinitely.
PRIVATIZATION OF NTEEP
On October 9, 2009, the Company sent a notice of compulsory acquisition (the "Notice") to all remaining independent shareholders of NTEEP to acquire their outstanding shares. Unless an application is made to the court of the Cayman Islands by the independent shareholders within 1 month of the Notice and the court thinks fit to order otherwise, the Company will be bound to acquire all the outstanding shares which is expected to be on November 12, 2009 upon the same terms as the offer.
The Stock Exchange of Hong Kong Limited has already approved the application of NTEEP to withdraw the listing of its shares on the Stock Exchange of Hong Kong with effect from 9:30 a.m. on November 13, 2009 subject to the completion of the compulsory acquisition which is expected to be on November 12, 2009. NTEEP will then become a wholly owned subsidiary of the Company.
COMPANY OUTLOOK
It has been a year since the start of the worldwide economy crisis in September 2008. In order to cope with this drastic drop in demand from the global market, Nam Tai had taken some strong measures of cost reduction such as retrenchment and salary reduction. Consequently, we saw noticeable improvements in the second quarter and third quarter 2009. Although sales improved in the third quarter, Nam Tai continues to view the business recovery conservatively.
The surge in sales in the third quarter is seasonal as the market is preparing for the Christmas season. In fear of overstocking, the market will be cautious and is expected to return to a weaker demand position in the fourth quarter of 2009. With a leaner organization structure after privatization and a more efficient operation, Nam Tai is set in a stronger preventive position to battle this unpredictable and fluctuating market in the coming quarters. It is expected that Nam Tai will make up for the initial losses in the first quarter and complete 2009 with a breakeven result.
Nam Tai expects the recovery rate at the turn of 2010 to be slow and not until in the third quarter of 2010 that the recovery will occur. Meanwhile, Nam Tai reinforces even stronger relations and ties with existing major customers. It is through these sound partnerships that will provide the support and business growth when the market recovers from the economy crisis. Nam Tai has also been able to identify synergies among the business units of LCP, TCP and CECP, and has embarked to develop greater depth of vertical integration to provide wider customer base and product markets. In order to support this, Nam Tai strengthens sales forces and expands manufacturing facilities in Wuxi. This building up of greater value in the capability becomes Nam Tai's proactive measures in the preparation for the awaited recovery in 2010.
FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE
Express or implied statements in this press release, such as management's assessment of the strength of Nam Tai's financial condition and cash position, our belief regarding the benefits and cost reductions to be realized upon completion of the privatization of NTEEP, the potential enhancement of Nam Tai's operating margins from management's continuing efforts to broaden Nam Tai's product offerings and services and to control expenses; management's expectations that Nam Tai's future results will benefit from efforts to strengthen Nam Tai's sales and technical teams through the support and co-ordination from the Company's Japan office, the expected future timing of increased demand for Nam Tai's products and services and management's expectations that Nam Tai will emerge from the current recession to become leaner, stronger and a more focused company, positioned for growth, among other statements in this press release, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by the use of words like "believes," "intends," "expects," "seeks", "plans" or "planned," "may," "will," "should" or "anticipates," or the negative equivalents of those words or comparable terminology, and involve risks and uncertainties. Such statements are based on current expectations and assumptions and reflect management's views with respect to future events and may not actually occur during the periods indicated or at all and are not a guarantee of Nam Tai's future performance. These forward-looking statements are, by their nature, subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by the forward-looking statements in this press release. These risks and uncertainties include whether the effects of management's efforts or actions to decrease costs by reducing Nam Tai's workforce or implementing reductions of salaries of Nam Tai's employees will continue to achieve material improvements or maintain or increase gross or operating margins or will offset potential declines in revenues resulting from ongoing economic conditions; whether management's actions to strengthen Nam Tai's sales and technical presence in Japan will have a material effect on sales or justify the funds expended in the process; whether management's recent and ongoing cost reduction measures will enable Nam Tai to emerge from the current economic conditions as a leaner, stronger, more focused company or positioned for growth or overcome or even cope with adverse global economic conditions generally or the fallout from such conditions on Nam Tai's business specifically, including the effect of increasing taxes and labor costs from relatively recent tax and labor legislation in the PRC; whether Nam Tai's revised expansion plans will be effective or sufficient to conserve capital or focus resources; and whether Nam Tai's completion of the privatization of NTEEP will provide Nam Tai's with meaningful benefits. Product orders and Nam Tai's operating results, available cash, cash flows, operating results and levels of capital expenditures may be adversely affected by numerous factors including adverse global economic conditions generally and the continuing uncertainties and fears regarding the world's and nations' economies; Nam Tai's dependence on a few large customers; intense competition in the electronics manufacturing services, or EMS, industry in which the Company participates, particularly in markets that place constant pressure on the Company to reduce unit prices; continuing competitive pressures that adversely affect its profit margins; its operating results fluctuating and lacking predictability; risks relating to its doing business in the PRC such as arising from changes in governmental policies, trade regulation, currency exchange rates, particularly from the appreciation of the renminbi to the U.S. dollar which has occurred since June 2005, and inflation in the PRC and elsewhere globally; the timing and amount of significant orders from customers; Nam Tai's success at attracting new customers; delays in product development and related product release schedules; obsolete inventory or product returns; warranty and other claims on products; technological shifts; the availability of competitive products of comparable quality at prices below Nam Tai's prices; maturing product life cycles of the products manufactured by Nam Tai; concessions Nam Tai may make on product sale terms and conditions; successful implementation of operating cost structures that align with revenue; the financial condition of Nam Tai's customers and vendors; the availability and increasing costs of materials and other components needed to manufacture Nam Tai's products; potential shortages of materials or skilled labor needed to complete its planned expansion project in Wuxi; unforeseen engineering problems, work stoppages, weather interference, flood, earthquake or other acts of God, delays in obtaining or failure to obtain necessary permits from regulatory authorities needed for completion of its planned new Wuxi facility or to continue existing operations; unanticipated cost increases; risks of expanding into a new area of the PRC where Nam Tai's has not yet conducted business, the success or failure of Nam Tai's efforts to return property acquired from the Wuxi government for the construction of the second factory and potential consequences to Nam Tai from terminating its second Wuxi expansion project; diversion of management's attention to a new factory in Wuxi and to other business concerns; the impact of legislative actions, higher insurance costs and potential new accounting pronouncements; a worsening of relations between the PRC and the United States; the effects of terrorist activity and armed conflict that cause disruptions in general economic activity and changes in Nam Tai's operations and security arrangements; the effects of travel restrictions and quarantines associated with major health problems, such as Severe Acute Respiratory Syndrome, Bird Flu or recent outbreaks of swine flu, on general economic activity; or other changes in general economic conditions, including an exacerbation of the current global economic weaknesses that continue to adversely affect, or further reduce, demand for Nam Tai's products. In addition, factors, among others, that could cause the market price of our shares to decline in the future could include further decreases in our revenues from those we reported in earlier periods, our operating results or those of our competitors or customers to meet the expectations of public market analysts and investors who follow the EMS, industry, or one or more of the factors discussed in "Item 3. Key Information -- Risk Factors" in our Annual Report on Form 20-F for the year ended December 31, 2008 as filed on March 13, 2009 with the Securities and Exchange Commission.
For further information regarding risks and uncertainties associated with Nam Tai's business, operating results or financial condition, please refer to the "Operating and Financial Review and Prospects," "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Risk Factors" sections of Nam Tai's SEC filings, including, but not limited to, its annual reports on Form 20-F and Reports on Form 6-K containing releases of Nam Tai's quarterly financial results, copies of which may be obtained from Nam Tai's website at http://www.namtai.com or from the SEC's EDGAR website at http://www.sec.gov.
All information in this press release is as of November 2, 2009 in Shenzhen of the People's Republic of China. Nam Tai does not undertake any duty, and should not be expected, to update any forward-looking statement to conform the statement to actual results or changes in Nam Tai's expectations.
ABOUT NAM TAI ELECTRONICS, INC.
We are an electronics manufacturing and design services provider to a select group of the world's leading OEMs of telecommunications and consumer electronic products. Through our electronics manufacturing services operations, we manufacture electronic components and subassemblies, including LCD panels, LCD modules, RF modules, DAB modules, FPC subassemblies and image-sensor modules and PCBAs for headsets containing Bluetooth® wireless technology. These components are used in numerous electronic products, including mobile phones, laptop computers, digital cameras, electronic toys, handheld video game devices, and entertainment devices. We also manufacture finished products, including mobile phone accessories, home entertainment products and educational products. We assist our OEM customers in the design and development of their products and furnish full turnkey manufacturing services that utilize advanced manufacturing processes and production technologies.
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(2)
-----------------------------------------------------------------
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of US Dollars except share and per share data)
Unaudited Unaudited
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
---- ---- ---- ----
Net sales $110,416 $160,534 $314,402 $453,831
Cost of sales 97,802 144,796 284,244 397,801
------------- ------ ------- ------- -------
Gross profit 12,614 15,738 30,158 56,030
Costs and expenses
Selling, general and
administrative expenses 6,470 8,484 20,579 27,315
Research and development
expenses 1,334 2,833 4,825 7,874
Employee severance benefits - - 5,058 -
---- ---- ---- ----
7,804 11,317 30,462 35,189
Operating Income (loss) 4,810 4,421 (304) 20,841
Other (expenses) income, net 31 244 (75) 6,731
Gain on sales of shares of a
subsidiary - - - 20,206
Interest income 59 1,583 665 4,873
Interest expense 18 (103) (202) (246)
-- ---- ---- ----
Income before income tax 4,918 6,145 84 52,405
Income tax expenses (391) (351) (1,029) (1,852)
---- ---- ------ ------
Net income (loss) 4,527 5,794 (945) 50,553
Less: Net loss (income)
attributable to the
noncontrolling interest (23) (882) 2,181 (5,471)
--- ---- ----- ------
Net income attributable to
Nam Tai shareholders $4,504 $4,912 $1,236 $45,082
====== ====== ====== =======
Earnings per share
(attributable to Nam Tai
shareholders)
Basic $0.10 $0.11 $0.03 $1.01
===== ===== ===== =====
Diluted $0.10 $0.11 $0.03 $1.01
===== ===== ===== =====
Weighted average number of
shares ('000)
Basic 44,804 44,804 44,804 44,804
Diluted 44,813 44,806 44,808 44,806
(2) On January 1, 2009, Nam Tai adopted Statement of Financial
Accounting Standards No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51,"
the provisions of which, among others, requires that minority
interests be renamed noncontrolling interests and that a company
present a consolidated net income (loss) measure that includes
the amount attributable to such noncontrolling interests for all
periods presented. The provisions of this accounting standard
will cease to be applicable once Nam Tai reports its results
following completion of the privatization of NTEEP.
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
AS AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(In Thousands of US Dollars)
Unaudited Audited
September 30 December 31
2009 2008
---- ----
ASSETS (Note)
Current assets:
Cash and cash equivalents $189,557 $237,017
Accounts receivable, net 72,365 104,150
Entrusted loan receivable (Note 1) - 8,199
Inventories 15,008 27,300
Prepaid expenses and other receivables 2,484 4,148
Deferred tax assets - current 1,504 1,232
----- -----
Total current assets 280,918 382,046
Property, plant and equipment, net 109,641 108,067
Land use right 13,370 13,593
Deposits for property, plant and equipment 910 2,937
Goodwill 2,951 2,951
Deferred tax assets-non current 3,934 3,547
Other assets 920 920
--- ---
Total assets $412,644 $514,061
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Entrusted loan payable (Note 1) $- $8,199
Notes payable 608 -
Accounts payable 63,983 98,125
Accrued expenses and other payables 18,576 25,967
Dividend payable - 9,857
Income tax payable 753 861
--- ---
Total current liabilities 83,920 143,009
Deferred tax liabilities 988 740
--- ---
Total liabilities 84,908 143,749
EQUITY
Nam Tai shareholders' equity:
Common shares 448 448
Additional paid-in capital 285,150 282,767
Retained earnings 40,290 39,054
Accumulated other comprehensive loss (Note 2) (8) (8)
-- --
Total Nam Tai shareholders' equity 325,880 322,261
Noncontrolling interest (NTEEP) 1,856 48,051
----- ------
Total equity 327,736 370,312
------- -------
Total liabilities and shareholders' equity $412,644 $514,061
======== ========
Note: Information extracted from the audited financial statements included
in the 2008 Form 20-F of the Company filed with the Securities and
Exchange Commission on March 13, 2009.
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
FOR THE PERIODS ENDED SEPTEMBER 30 2009 AND 2008
(In Thousands of US Dollars)
Unaudited Unaudited
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
---- ---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $4,504 $4,912 $1,236 $45,082
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization of
property, plant and
equipment and land use
right 5,964 5,433 16,447 16,744
Net (gain) loss on
disposal of property,
plant and equipment (146) 3 (409) 5
Dividend withheld - - - (305)
Gain on sales of
subsidiaries' shares - - - (20,206)
Share-based compensation
expenses - 48 67 1,206
Noncontrolling interest 23 882 (2,181) 5,471
Deferred income taxes (351) (574) (411) (943)
Unrealized exchange
(gain) loss (41) (257) (2) (3,940)
Changes in current assets
and liabilities:
(Increase) decrease in
accounts receivable (6,741) (43,473) 31,785 (28,917)
Decrease (increase) in
inventories 1,216 (10,482) 12,292 (383)
(Increase) decrease in
prepaid expenses and
other receivables (106) (103) 1,664 1,902
Decrease in income taxes
recoverable - 3,544 - 5,439
Increase (decrease) in
notes payable 608 (2,571) 608 (4,580)
Increase (decrease) in
accounts payable 736 39,880 (34,142) 10,254
(Decrease) increase in
accrued expenses and
other payables (1,119) 30 (3,983) (2,219)
Increase (decrease) in
income tax payable 212 (229) (108) 526
--- ---- ---- ---
Total adjustments 255 (7,869) 21,627 (19,946)
--- ------ ------ -------
Net cash provided by
(used in) operating
activities $4,759 $(2,957) $22,863 $25,136
------ ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES
Net cash (outflow) inflow
from disposal of
subsidiaries - - - 6,671
Purchase of property,
plant and equipment (7,124) (5,801) (21,657) (13,469)
Decrease (increase) in
deposits for purchase of
property, plant and
equipment 1,892 725 2,027 (224)
Increase in prepayment
for purchase of land - - - (663)
Decrease (increase) in
entrusted loan
receivable 8,199 (19) 8,199 (8,185)
Acquisition of additional
shares in subsidiaries (41,698) (876) (41,698) (2,906)
Proceeds from disposal of
property, plant and
equipment 155 1 860 31
--- --- --- --
Net cash (used in)
investing activities $(38,576) $(5,970) $(52,269) $(18,745)
-------- ------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash dividends paid $- $(12,695) $(9,857) $(37,819)
-------------------
(Repayment of) proceeds
from entrusted loan (8,199) 19 (8,199) 8,185
Repayment of bank loans (628) - - (2,648)
---- --- --- ------
Net cash (used in)
financing activities $(8,827) $(12,676) $(18,056) $(32,282)
------- -------- -------- --------
Net (decrease) in cash
and cash equivalents (42,644) (21,603) (47,462) (25,891)
Cash and cash equivalents
at beginning of period 232,160 271,854 237,017 272,459
Effect of exchange rate
changes on cash and cash 41 257 2 3,940
Equivalents
-- --- --- -----
Cash and cash equivalents
at end of period $189,557 $250,508 $189,557 $250,508
======== ======== ======== ========
NAM TAI ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
-----------------------------------------------------
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of US Dollars)
1. The entrusted loan represents the loan arrangement between two
subsidiaries, Namtai Electronic (Shenzhen) Co. Ltd. (the "entrusting
party") and Jetup Electronic (Shenzhen) Co. Ltd. (the "borrower"), via
HSBC Bank (China) Company Limited, Shenzhen Branch (the "lender").
2. Accumulated other comprehensive income represents foreign currency
translation adjustments. The comprehensive income attributable to
Nam Tai shareholders of the Company was $1,236 and $45,082 for the
nine months ended September 30, 2009 and September 30, 2008,
respectively.
3. Business segment information - The Company operates primarily in three
segments, the Consumer Electronic and Communication Products ("CECP")
segment, Telecommunication Component Assembly ("TCA") segment, and
the LCD Products ("LCDP") segment.
Unaudited Unaudited
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
---- ---- ---- ----
Net sales:
- CECP $28,161 $65,884 $90,734 $209,062
- TCA 61,842 72,557 172,809 183,715
- LCDP 20,413 22,093 50,859 61,054
Total net sales $110,416 $160,534 $314,402 $453,831
======== ======== ======== ========
Net Income:
- CECP $2,603 $6,530 $4,600 $21,472
- TCA 693 (545) (956) 3,656
- LCDP 1,863 (317) 455 (415)
- Corporate (655) (756) (2,863) 20,369
Total net income (loss)
attributable to Nam Tai
shareholders $4,504 $4,912 $1,236 $45,082
====== ====== ====== =======
Unaudited Audited
Sep. 30, Dec. 31,
2009 2008
-------- --------
Identifiable assets by SEGMENT:
- CECP $133,299 $189,889
- TCA 144,233 164,516
- LCDP 41,252 42,977
- Corporate 93,860 116,679
------ -------
Total assets $412,644 $514,061
======== ========
NAM TAI ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
-----------------------------------------------------
FOR THE PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of US Dollars)
4. A summary of the net sales, net income and long-lived assets by
geographic areas is as follows:
Unaudited Unaudited
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
---- ---- ---- ----
Net sales from operations
within:
- PRC, excluding Hong Kong
and Macao:
Unaffiliated customers $110,416 $160,534 $314,402 $453,831
Intercompany sales 4 18 19 136
- Intercompany
eliminations (4) (18) (19) (136)
-- --- --- ----
Total net sales $110,416 $160,534 $314,402 $453,831
======== ======== ======== ========
Net Income from operations
within:
- PRC, excluding Hong Kong
and Macao $4,644 $1,288 $3,435 $12,541
- Hong Kong & Macao (140) 3,624 (2,199) 32,541
---- ----- ------ ------
Total net income (loss)
attributable to Nam Tai
shareholders $4,504 $4,912 $1,236 $45,082
====== ====== ====== =======
Unaudited Audited
Sep. 30, Dec. 31,
2009 2008
--------- --------
LONG-LIVED assets WITHIN:
- PRC, excluding Hong Kong and Macao $122,881 $121,475
- Hong Kong and Macao 130 185
--- ---
Total long-lived assets $123,011 $121,660
======== ========
SOURCE Nam Tai Electronics, Inc.