TechFaith Reports Fourth Quarter and Full Year 2012 Financial Results

Mar 12, 2013, 06:33 ET from China TechFaith Wireless Technology Limited

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



RELATED LINKS

http://www.techfaithwireless.com