TechFaith Reports Fourth Quarter and Full Year 2012 Financial Results

BEIJING, March 12, 2013 /PRNewswire/ -- 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, 2012.

For the fourth quarter of 2012, TechFaith reported net revenues of US$31.0 million compared to US$31.5 million in the third quarter of 2012. Gross profit for the fourth quarter of 2012 was US$5.9 million compared to US$7.2 million in the third quarter of 2012. Gross margin for the fourth quarter was 19.1% compared to 22.8% in the previous quarter. Net loss attributed to TechFaith for the fourth quarter of 2012 was US$3.0 million or US$(0.06) per basic and diluted weighted average outstanding ADS, compared to net income of US$0.9 million or US$0.02 per basic and diluted weighted average outstanding ADS in the third quarter of 2012.

For the full year ended December 31, 2012, TechFaith reported net revenues of US$137.7 million compared to US$323.8 million for the full year ended December 31, 2011. The decline in revenues was mainly due to higher levels of competition, which led to a material decline in the Company's Original Developed Product (ODP) and game business, and the negative impact of our shift from Windows Mobile-based smartphones to Android-based smartphones. Gross profit for the full year 2012 was US$31.3 million compared to US$85.2 million for the full year 2011. Gross margin for the full year 2012 was 22.7% compared to 26.3% for the full year 2011. Operating expenses for the full year 2012 were US$31.1 million compared to US$50.2 million for the full year 2011. Net loss for full year 2012 was US$3.3 million or US$ (0.06) per basic and diluted weighted average outstanding ADS, compared to net income of US$27.1 million or US$0.51 per basic and diluted weighted average outstanding ADS for the full year 2011.

Ms. Ouyang Yuping, TechFaith's Chief Financial Officer, said, "It was a very challenging year for TechFaith as we were impacted by global economic weakness and higher levels of competition. We kept strict operating controls in place to help us weather the volatility in the market. Specifically, we reduced our operating expenses by 38.0% for the full year. It is also worth noting that despite the significant decline in our revenues, we were able to hold gross margin at 22.7% for the full year 2012 by focusing on higher margin, niche business opportunities. Our balance sheet continues to give us the ability to pursue the long-term business initiatives and strategy that are central to our company's success, even with higher levels of competition and further expected market volatility."

Mr. Deyou Dong, President and Chief Operating Officer of TechFaith, said, "2012 was a tough year for us as we faced a steep unit volume reduction in our mobile phone business and difficult business environments in the key segments we operate. We made the shift to Android smartphones but would have benefited from shifting earlier in the product cycle. We understand the markets that we are operating in, which are characterized by tough competition, fast changes, high uncertainty and margin pressure in the mobile phone business. Our ability to succeed in the niche segments we are targeting and our track record of product innovations, ranging from improved imaging and bigger capacitive touch screens, is helping us to keep on track even with the expected continuation of headwinds and high levels of competition. For example, customer response remains positive for our ruggedized devices. This is a product line that leverages our strong hardware design capabilities and meets a unique need in a profitable niche market. With that said, this is also a global market that we see as having significant potential. We are pursuing other opportunities in middle to high-end mobile handsets that leverage our strengths in both domestic and international markets as we work to return to sustainable growth and profitability."

Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "We are focused on pursuing the opportunities that will put the rough 2012 behind us. We have successfully navigated similar tough market situations in the past and we are confident in our ability to do so once again.  The big difference between our current situation and our less profitable prior transition periods is that our core business is now moving forward on a larger scale and we now have a much stronger balance sheet. We continue to refresh our product portfolio, which differentiates TechFaith in the niche markets we are going after, through unique hardware offerings. We provide carriers and partners unique solutions that address unmet mobile needs in the outdoor adventure market and in the market for highly sensitive medical monitoring applications. Because we are operating from a position of financial strength, we are able to pursue the long-term strategy that is essential to the Company's success and to creating value for our shareholders. For example, we recently announced we would promote 3D motion sensing technology, delivery platforms and games in China. This is an exciting new area in the gaming market that allows us to leverage our motion gaming expertise. We have previously built motion gaming content and distribution assets and understand the potential 3D has to give gamers an even more entertaining experience. We are optimistic about this opportunity and others in the core mobile communications area, which have growth potential in 2013."

First Quarter of 2013 Outlook

The below forecast is TechFaith's current and preliminary view, which is subject to change. TechFaith currently expects total revenues for the first quarter of 2013 to be in the range of US$28.0 million to US$33.0 million.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Tuesday, March 12, 2013 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Tuesday, March 12, 2013 in Beijing). The dial-in number for the live audio call is +1-617-213-8849 or +1-866-203-3436. The conference call passcode is 38061147. 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 by telephone at +1-617-801-6888, with passcode 86477094. A webcast replay will also be available at www.techfaithwireless.com.

About TechFaith

TechFaith (NASDAQ: CNTF) has three primary businesses. The Company is a leading global mobile solutions provider for the global mobile handsets market (previously called the ODP (Original Developed Product) business)). The Company is a leading developer of specialized mobile phones for differentiated market segments, including the rapidly growing smartphone market targeting wireless mobile phone network operators and end users; the Company also serves sports enthusiasts with a tailored line under the Jungle brand and the teen market under licensed brands. Under the Company's 17FOX brand (previously "17VEE"), the Company has built a leading intellectual property based motion gaming business ranging from Bluetooth-enabled motion gaming controllers and software to a planned proprietary set-top motion game box. For more information, please visit www.techfaithwireless.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.

CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(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


2012


2012

2011


2012

2011









Revenues:








ODP

$13,311


$12,077

$50,711


$57,803

$212,784

Brand name phone sales

11,329


11,617

19,274


50,266

67,535

Game

6,909


7,338

11,702


29,594

43,481

Total net revenues

$31,549


$31,032

$81,687


$137,663

$323,800









Cost of revenues:








ODP

$12,222


$10,577

$45,062


$53,971

$174,991

Brand name phone sales

7,783


8,940

11,916


34,250

41,280

Game

4,337


5,577

5,630


18,146

22,293

Total cost of revenues

$24,342


$25,094

$62,608


$106,367

$238,564









Gross Profit

$7,207


$5,938

$19,079


$31,296

$85,236









Operating expenses:








General and administrative

$669


$1,957

$4,384


$5,594

$18,848

Research and development

2,192


2,010

3,820


9,343

13,541

Selling and marketing

1,545


801

7,652


12,328

17,196

Impairment of intangible assets

702


3,131

-


3,833

-

Impairment of goodwill

-


-

-


-

606

Total operating expenses

$5,108


$7,899

$15,856


$31,098

$50,191









Government subsidy income

99


44

36


232

224

Other operating income

281


475

683


1,124

2,824









Income (loss) from operations

$2,479


$(1,442)

$3,942


$1,554

$38,093









Interest income

523


428

388


2,032

1,365

Other (expenses) income

(313)


663

(83)


354

(79)

Change in fair value of put option

(90)


(60)

(150)


(150)

(150)

Income (loss) before income
taxes

$2,599


$(411)

$4,097


$3,790

$39,229

Income tax expenses

(1,518)


(2,147)

(636)


(5,635)

(9,419)

Net income (loss)

$1,081


$(2,558)

$3,461


$(1,845)

$29,810

Less: net income attributable to the noncontrolling interest

(205)


(485)

(776)


(1,449)

(2,683)

Net income (loss) attributable to
TechFaith

$876


$(3,043)

$2,685


$(3,294)

$27,127









Net income (loss) attributable to TechFaith per share








  Basic

$0.00


$(0.00)

$0.00


$(0.00)

$0.03

  Diluted

$0.00


$(0.00)

$0.00


$(0.00)

$0.03









Net income (loss)  attribute to
TechFaith per ADS








  Basic

$0.02


$(0.06)

$0.05


$(0.06)

$0.51

  Diluted

$0.02


$(0.06)

$0.05


$(0.06)

$0.51









Net income (loss)

$1,081


$(2,558)

$3,461


$(1,845)

$29,810

Other comprehensive income,
net of tax








Foreign currency translation
adjustment

4,008


2,894

3,960


3,525

13,026

Comprehensive income

5,089


336

7,421


1,680

42,836









Less: Comprehensive income
attributable to noncontrolling
interest

(482)


(706)

(1,303)


(1,749)

(3,210)

Comprehensive income (loss)
attributable to TechFaith

$4,607


$(370)

$6,118


$(69)

$39,626









Weighted average shares
outstanding








  Basic

794,003,193


794,003,193

794,003,193


794,003,193

794,003,193

  Diluted

794,003,193


794,003,193

794,003,193


794,003,193

794,003,193


     CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands of U.S. Dollars)














December 31, 2012


September 30, 2012


December 31, 2011







Assets






Current assets:






Cash and cash equivalents

$257,950


$265,044


$250,637

Accounts receivable

8,666


4,552


6,715

Inventories

7,490


6,486


7,984

Prepaid expenses and other current assets

15,678


20,528


17,560

Deferred tax assets-current

-


226


207

Total current assets

$289,784


$296,836


$283,103







Plant, machinery and equipment, net

$44,084


$44,214


$48,977

Land use rights, net

10,645


10,607


10,755

Construction in progress

36,530


26,688


21,002

Acquired intangible assets, net

4,061


6,306


2,327

Goodwill

1,242


1,242


1,242

Deferred tax assets-noncurrent

-


1


3

Total assets

$386,346


$385,894


$367,409







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, 2012, September 30,
2012 and December 31, 2011
respectively)

11,140


10,176


8,792

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,
$184, $684 and $837 as of as of
December 31, 2012, September 30, 2012
and December 31, 2011 respectively)

13,464


14,364


21,721

Advance from customers (including
advance from customers of the
consolidated variable interest entities
without recourse to China TechFaith
Wireless Communication Technology
Limited, $nil and $217 and $202 as of
December 31, 2012, September 30, 2012
and December 31, 2011 respectively)

9,173


9,324


8,492

Deferred revenue (including deferred
revenue of the consolidated variable
interest entities without recourse to China
TechFaith Wireless Communication
Technology Limited, $nil, $nil and $nil as
of December 31, 2012, September 30,
2012 and December 31, 2011
respectively)

4,178


4,584


219

Income tax payable (including income tax
payable of consolidated variable interest
entities without recourse to China
TechFaith Wireless Communication
Technology Limited, $21, $21 and $21 as
of December 31, 2012, September 30,
2012 and December 31, 2011
respectively)

1,062


660


1,804

Short-term loan (including short-term loan of the consolidated variable interest
entities without recourse to China
TechFaith Wireless Communication
Technology Limited, $nil, $nil and $nil as
of December 31, 2012, September 30,
2012 and December 31, 2011 respectively)

15,350


15,350


-

Total current liabilities

$54,367


$54,458


$41,028







Long-term loan

290


290


290

Deferred tax liability-noncurrent

-


81


106







Total liabilities

$54,657


$54,829


$41,424







Shareholders' equity






Paid in capital

$16


$16


$16

Additional paid-in capital

142,837


142,549


141,667

Accumulated other comprehensive
income

46,822


44,149


43,597

Statutory reserve

23,137


22,631


22,631

Retained earnings

93,472


97,021


97,272

Total TechFaith shareholders' equity

$306,284


$306,366


$305,183

Noncontrolling interest

$25,405


$24,699


$20,802

Total shareholders' equity

$331,689


$331,065


$325,985

Total liabilities and shareholders'
equity

$386,346


$385,894


$367,409

SOURCE China TechFaith Wireless Technology Limited



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