TechFaith Reports Fourth Quarter and Full Year 2011 Financial Results

BEIJING, Feb. 29, 2012 /PRNewswire-Asia/ -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced its unaudited financial results for the fourth quarter and the full year ended December 31, 2011.

For the fourth quarter of 2011, TechFaith reported net revenue of US$81.7 million, a 6.2% increase compared to US$76.9 million in the fourth quarter of 2010 due to increased sales volume in the branded mobile phone segment and higher revenue from the Company's motion gaming business. Gross profit for the fourth quarter of 2011 was US$19.1 million, an 11.2% decrease compared to US$21.5 million in the same quarter last year, due to a materials cost increase combined with a higher inflation rate in China. As a result, gross margin for the fourth quarter of 2011 was 23.4% compared to 27.9% in the same quarter in 2010. Operating expense for the fourth quarter of 2011 was US$15.9 million compared to US$10.2 million in the fourth quarter of 2010, due to increased sales and marketing expenses in support of higher branded mobile phone sales and the Company's motion gaming business. Net income attributed to TechFaith for the fourth quarter of 2011 was US$2.7 million or US$0.05 per basic and diluted weighted average outstanding ADS, compared to US$8.9 million or US$0.17 per basic and diluted weighted average outstanding ADS in the fourth quarter of 2010.

For the full year ended December 31, 2011, TechFaith reported net revenue of US$323.8 million, a 19.1% increase compared to US$271.9 million for the full year 2010, led by growth in the Company's branded mobile sales and motion gaming business.  Gross profit for the full year 2011 was US$85.2 million, a 27.0% increase compared to US$67.1 million for the full year 2010.  Gross margin for the full year 2011 was 26.3% compared to 24.7% for the full year 2010. Operating expense for the full 2011 was US$50.2 million compared to US$32.3 million for the full year 2010, led by higher sales and marketing expenses in support of higher branded mobile phone sales and its motion gaming business.  Net income for the full year 2011 was US$27.1 million or US$0.51 per basic and diluted weighted average outstanding ADS, compared to net income of US$27.8 million or US$0.57 and US$0.50 per basic and diluted weighted average outstanding ADS for the full year 2010.

Mr. Defu Dong, Chairman and chief executive officer of TechFaith, said, "TechFaith achieved nearly 20% revenue growth in 2011, as our branded smartphones, mobile phones and ODP (Original Developed Products) helped differentiate us in a challenging global marketplace.  We saw pressure on our business throughout the year and expect this to continue in 2012, as the global economic environment has created nearly constant headwinds with weakness in the key end markets we serve."

Ms. Ouyang Yuping, TechFaith's chief financial officer, said, "We continue to focus on business opportunities in the ODP, branded mobile phone and gaming markets.  We are working to put the appropriate resources in place to support the areas of our business that have the highest potential, while also actively managing our operating expenses.  Our strong balance sheet gives us the continued ability to support the long-term business initiatives and strategy central to our long-term success, despite continued expected near-term market weakness."

Mr. Deyou Dong, President and chief operating officer of TechFaith, said, "We have made considerable headway in our efforts to establish TechFaith as a globally recognized brand.  Our success is evidenced by the geographic mix of our revenue 2011, with shipments of our phones to diverse markets including China, South East Asia, Europe, Latin America and Japan.  We continue to gain attention due to the value prospect we offer with tailored phones and compelling enterprise solutions.  Our history of design expertise allows us to move quickly and to deliver the technically sound, tailored solutions that customers are seeking."

First Quarter 2012 Outlook

The following forecast reflects the expected material impact of seasonality in the first quarter of 2012. The forecast is TechFaith's current and preliminary view, which is subject to change.  TechFaith currently expects total revenue for its ODP, branded and gaming businesses to be in the range of US$41 million to US$45 million in the first quarter of 2012. The anticipated decline from the fourth quarter of 2011 and recent revenue levels is driven primarily by the expected material impact of seasonality in the first quarter, combined with higher competition and expected lower overall demand for its ODP and branded mobile phone business.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Wednesday, February 29, 2012 at 8:00 a.m. U.S. Eastern Time (9:00 p.m. Wednesday, February 29, 2012 in Beijing).  The dial-in phone number is +1-617-786-2962 or +1-800-901-5213. The conference call passcode is 26631902. A live webcast of the conference call will also be available on TechFaith's website at www.techfaithwireless.com.

A replay of the call will be available approximately 2 hours after the conclusion of the live call through 10:00 p.m. U.S. Eastern Time on March 6, 2012, (11:00 a.m., March 7, 2012 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 23416986. A webcast replay will also be available at http://www.techfaithwireless.com.

About TechFaith

TechFaith (NASDAQ: CNTF) has three primary businesses. The Company is a leading global ODP (Original Developed Product) provider for global mobile handsets market. Under its TecFace brand, the Company is a leading developer of specialized mobile phones for differentiated market segments, including the rapidly growing Smartphone market targeting users and Operators through its TecFace brand; Outdoor and Sports enthusiasts through its Jungle brand; and the Teen market through licensed brands. Under the Company's 17Vee brand, the Company has built a leading, intellectual property based somatic gaming business ranging from Bluetooth enabled somatic gaming controllers and software to a recently launched proprietary set-top somatic game box. For more information, please visit www.techfaithwireless.com, www.17vee.com and www.798game.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident," "outlook" and similar statements. Among other things, the business outlook and strategic and operational plans of TechFaith and management quotations contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

CONTACTS:    

 

In China:
Jay Ji
China Techfaith Wireless Communication Technology Limited
Tel: 86-10-5822-8390
ir@techfaith.cn

In the U.S.:
David Pasquale
Global IR Partners
Tel: +1 914-337-8801
cntf@globalirpartners.com

 

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands of U.S. Dollars, except share and per share/ADS data and unless otherwise stated)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

Twelve Months Ended

September 30

 

December 31

 

December 31

 

2011

 

2011

2010

 

2011

2010

 

 

 

 

(As adjusted)(1)

 

 

 

Revenues:

 

 

 

 

 

 

 

ODP

$52,348

 

$50,711

$55,982

 

$212,784

$222,549

Brand name phone sales

17,168

 

19,274

14,366

 

67,535

38,462

Game

11,131

 

11,702

6,527

 

43,481

10,866

Total net revenues

$80,647

 

$81,687

$76,875

 

$323,800

$271,877

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

ODP

$44,423

 

$45,062

$45,646

 

$174,991

$180,517

Brand name phone sales

10,379

 

11,916

7,706

 

41,280

22,066

Game

6,731

 

5,630

2,067

 

22,293

2,202

Total cost of revenues

$61,533

 

$62,608

$55,419

 

$238,564

$204,785

 

 

 

 

 

 

 

 

Gross Profit

$19,114

 

$19,079

$21,456

 

$85,236

$67,092

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

General and administrative

$3,233

 

$4,453

$5,591

 

$19,089

$14,711

Research and development

3,687

 

3,820

2,853

 

13,541

11,613

Selling and marketing

4,425

 

7,652

1,771

 

17,196

6,084

Impairment of goodwill

606

 

-

-

 

606

-

Exchange gain

(107)

 

(69)

(65)

 

(241)

(85)

Total operating expenses

$11,844

 

$15,856

$10,150

 

$50,191

$32,323

 

 

 

 

 

 

 

 

Government subsidy income

111

 

36

8

 

224

159

Other operating income

175

 

683

767

 

2,824

1,109

 

 

 

 

 

 

 

 

Income from operations

$7,556

 

$3,942

$12,081

 

$38,093

$36,037

 

 

 

 

 

 

 

 

Interest expense

-

 

-

-

 

-

(1)

Interest income

362

 

388

252

 

1,365

882

Investment income

-

 

-

142

 

-

142

Other income (expenses), net

3

 

(83)

(120)

 

(79)

(101)

Change in fair value of derivatives
 embedded in Convertible notes

-

 

-

-

 

-

1,280

Change in fair value of put option

-

 

(150)

(30)

 

-(150)

(123)

Income before income taxes

$7,921

 

$4,097

$12,325

 

$39,229

$38,116

Income tax expenses

(4,249)

 

(636)

(2,812)

 

(9,419)

(9,458)

Net income

$3,672

 

$3,461

$9,513

 

$29,810

$28,658

Less: net (income) loss attributable to the non-controlling interests

(395)

 

(776)

(659)

 

(2,683)

(818)

Net income attributable to TechFaith

$3,277

 

$2,685

$8,854

 

$27,127

$27,840

 

 

 

 

 

 

 

 

Net income attributable to TechFaith per share

 

 

 

 

 

 

 

  Basic

$0.00

 

$0.00

$0.01

 

$0.03

$0.04

  Diluted

$0.00

 

$0.00

$0.01

 

$0.03

$0.03

 

 

 

 

 

 

 

 

Net income  attribute to TechFaith per ADS

 

 

 

 

 

 

 

  Basic

$0.06

 

$0.05

$0.17

 

$0.51

$0.57

  Diluted

$0.06

 

$0.05

$0.17

 

$0.51

$0.50

 

 

 

 

 

 

 

 

Weighted average shares
outstanding

 

 

 

 

 

 

 

  Basic

794,003,193

 

794,003,193

794,003,193

 

794,003,193

732,784,822

  Diluted

794,003,193

 

794,003,193

794,003,193

 

794,003,193

795,843,605

 

 

 

 

 

 

 

 

 

 

 


 

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands of U.S. Dollars)

 

 

 

 

 

 

 

December 31, 2011

 

September 30, 2011

 

December 31, 2010

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$250,637

 

$236,297

 

$198,536

Accounts receivable, net

6,715

 

9,070

 

19,241

Amounts due from a related party

-

 

4,960

 

8,061

Inventories

7,984

 

12,466

 

17,745

Prepaid expenses and other current assets

17,560

 

9,864

 

7,997

Deferred tax assets-current

207

 

179

 

163

Total current assets

$283,103

 

$272,836

 

$251,743

 

 

 

 

 

 

Plant, machinery and equipment, net

$48,977

 

$48,130

 

$41,832

Land use right

10,755

 

8,304

 

-

Construction in progress

21,002

 

15,679

 

2,576

Acquired intangible assets, net

2,327

 

2,493

 

2,799

Goodwill

1,242

 

1,242

 

1,848

Deferred tax assets-noncurrent

3

 

-

 

-

Other Assets

-

 

-

 

3,155

Total assets

$367,409

 

$348,684

 

$303,953

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable (including accounts payable of the consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $nil, $nil and $nil as of  December 31, 2010, September 30, 2011 and December, 2011 respectively)

8,792

 

7,520

 

7,819

Amounts due to related parties

-

 

48

 

46

Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $1,272,$841 and $837 as of  December 31, 2010, September 30, 2011 and December 31, 2011 respectively)

21,721

 

17,958

 

15,195

Advance from customers (including advance from customers of the consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $339, $208 and $202 as of December 31, 2010,September 30, 2011 and December 31, 2011 respectively)

8,492

 

8,390

 

7,450

Deferred revenue

219

 

307

 

291

Income tax payable (including income tax payable of consolidated variable interest entities without recourse to China Techfaith Wireless Communication Technology Limited, $1,282, $19 and $21 as of  December 31, 2010, September 30, 2011 and December 30, 2011 respectively)

1,804

 

4,094

 

3,175

Total current liabilities

$41,028

 

$38,317

 

$33,976

 

 

 

 

 

 

Long-term loan

290

 

290

 

290

Deferred tax liability-non-current

106

 

114

 

140

 

 

 

 

 

 

Total liabilities

$41,424

 

$38,721

 

$34,406

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

Paid in capital

$16

 

$16

 

$16

Additional paid-in capital

141,667

 

141,236

 

139,495

Accumulated other comprehensive income

43,597

 

40,164

 

31,098

Statutory reserve

22,631

 

16,679

 

16,679

Retained earnings

97,272

 

100,539

 

76,097

Total Techfaith shareholders' equity

$305,183

 

$298,634

 

$263,385

Noncontrolling interest

$20,802

 

$11,329

 

$6,162

Total shareholders' equity

$325,985

 

$309,963

 

$269,547

Total liabilities and shareholders' equity

$367,409

 

$348,684

 

$303,953

(1) The Company subsequently reconsidered the accounting of the issuance of the Convertible Notes ("Notes") in 2009 and decided to restate its 2009 financial statement to reflect a more proper accounting treatment. Previously, we first allocated a portion of the proceeds to the embedded derivatives at fair value, and then allocated the remaining proceeds to the debt host. Since the fair value of embedded derivatives exceeded the net proceeds of the Notes, a debit amount of US$3.2 million for the debt host was recorded at issuance date. We then accreted the residual amount (the residual amount of the debt host after deducting the embedded derivatives) to the amount due on the redemption of the Notes over the life of the debt instrument assuming no conversion on redemption. Subsequently, to reflect a more proper accounting treatment, we recognized the embedded derivatives at its fair value of US$12.8 million and recognized the difference between that amount and the amount of the net proceeds as a loss upon the issuance of the Notes. As a result, for the three months period ended December 31, 2010, the interest expenses in relation to the Notes was $nil. And for the twelve months period ended December 31, 2010, the interest expense in relation to the Notes was adjusted from US$730,817.0 to US$829.0.

 

SOURCE China TechFaith Wireless Technology Limited



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