TechFaith Reports Second Quarter 2013 Financial Results

BEIJING, Aug. 20, 2013 /PRNewswire/ -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced unaudited financial results for the second quarter ended June 30, 2013.

For the second quarter of 2013, TechFaith reported net revenue of US$30.2 million, an increase of 6.8% compared to US$28.2 million in the previous quarter. Revenue in the second quarter of 2013 derived from the Company's Original Developed Product (ODP) was US$20.1 million compared to US$14.5 million in the first quarter of 2013 and US$13.5 million in the second quarter of 2012. Revenue from the Company's Game segment was US$1.6 million compared to US$3.4 million in the prior quarter and US$7.2 million in the second quarter of 2012. Revenue in the second quarter of 2013 from the Company's Brand name phone sales segment was US$8.4 million compared to US$10.3 million in the first quarter of 2013 and US$11.8 million in the second quarter of 2012.

Gross profit for the second quarter of 2013 was US$3.4 million compared to US$4.6 million in the previous quarter and US$7.3 million in the second quarter of 2012. Gross margin for the second quarter of 2013 was 11% compared to 16% in the previous quarter and 23% compared to the second quarter of 2012. Net loss attributed to TechFaith for the second quarter of 2013 was US$0.97 million or US$0.02 loss per basic and diluted weighted average outstanding ADS, compared to net income of US$0.3 million or US$0.01 per basic and diluted weighted average outstanding ADS in the previous quarter and a net loss of US$0.7 million or US$0.01 loss per basic and diluted weighted average outstanding ADS in the second quarter of 2012.

Ms. Ouyang Yuping, TechFaith's Chief Financial Officer, said, "While revenue for the second quarter was in line with our guidance, our gross margin was lower than expected as a result of  the negative impact of competitions from the market. We would expect to see improvement in our gross margin in the third quarter. Demand in our ODP business was able to offset declines in both our Brand name phone sales and game business. This volatility is a continuation of the difficult business environment we have been navigating, with high competition in both domestic and international markets, shorter product lifecycles and lower average selling prices. While our balance of cash and cash equivalents remained robust at US$257.7 million it reflects a decline of about US$3.5 million compared to the prior quarter. The slight decline is primarily due to capital expenditure on equipment and facility constructions."

Mr. Deyou Dong, President and Chief Operating Officer of TechFaith, said, "We continue to see demand for our popular ruggedized phones. As a result, we launched several new models this year, and have received positive feedback. We are optimistic that shipments for the new ruggedized models will increase over the next few quarters given the uniqueness of the integrated hardware and software. The phone meets demands from a specific segment of the market and allows us to have more stability over our pricing. We are working to leverage our success with the ruggedized line into other niche models where market demand is not being presently met. We also continue to draw on our expertise to provide customized enterprise solutions for our customers and continue to develop our 17Fox brand in the domestic China market. In line with this strategy, we acquired some additional application software during the second quarter."

Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "The market remains highly competitive with new features quickly adopted by other handset developers. Our focus on niche opportunities gives us a more defensible market position but the unit volumes are much lower than those in popular mass market designs. This makes it critical that we maintain close relationships with our customers in order to meet their changing needs. We are confident that we can be successful in our approach but do not expect to see a rebound in our revenue to our higher historical levels over the near-term. Rather, we are focusing on driving improved profitability at the lower revenue level, and further strengthening our balance sheet. We also remain optimistic about the development of our facilities, which remain on track, as seen by the increased asset level on our balance sheet in terms of construction in progress and property value held."

Third Quarter of 2013 Outlook

The forecast below is TechFaith's current and preliminary view, which is subject to change. TechFaith currently expects total revenues for the third quarter of 2013 to be in the range of US$29.0 million to US$33.0 million.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Tuesday, August 20, 2013 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Tuesday, August 20, 2013 in Beijing) using dial-in +1-857-244-7556 or +1-877-474-9503. The conference call passcode is 16255845. 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 32882355. 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


Six Months
Ended

March 31,


June 30,


June 30,


2013


2013

2012


2013

2012









Revenues:








ODP

$14,532


$20,128

$13,470


$34,660

$32,415

Brand name phone sales

10,301


8,392

11,785


18,693

27,320

Game

3,402


1,643

7,151


5,045

15,347

Total net revenues

$28,235


$30,163

$32,406


$58,398

$75,082









Cost of revenues:








ODP

$13,157


$19,059

$13,661


$32,216

$31,172

Brand name phone sales

7,878


6,414

7,680


14,292

17,527

Game

2,639


1,303

3,746


3,942

8,232

Total cost of revenues

$23,674


$26,776

$25,087


$50,450

$56,931









Gross Profit

$4,561


$3,387

$7,319


$7,948

$18,151









Operating expenses:








General and administrative

$1,747


$1,722

$1,512


$3,469

$2,968

Research and development

1,845


1,884

2,179


3,729

5,141

Selling and marketing

647


657

4,626


1,304

9,982

Total operating expenses

$4,239


$4,263

$8,317


$8,502

$18,091









Government subsidy income

19


170

-


189

89

Other operating income

284


297

269


581

368









Income (loss) from operations

$625


$(409)

$(729)


$216

$517









Interest expenses

-


(1)

-


(1)

-

Interest income

523


447

635


970

1,081

Other income

-


4

4


4

4

Change in fair value of put option

(30)


(30)

-


(60)

-

Income (loss) before income

taxes

$1,118


$11

$(90)


$1,129

$1,602

Income tax expenses

(754)


(1,177)

(278)


(1,931)

(1,970)

Net income (loss)

$364


$(1,166)

$(368)


$(802)

$(368)

Less: net (income) loss

attributable to the noncontrolling

interest

(58)


196

(346)


138

(759)

Net income (loss) attributable to

TechFaith

$306


$(970)

$(714)


$(664)

$(1,127)









Net income (loss) attributable to

TechFaith per share








  Basic

$0.00


$(0.00)

$(0.00)


$(0.00)

$(0.00)

  Diluted

$0.00


$(0.00)

$(0.00)


$(0.00)

$(0.00)









Net income (loss) attribute to

TechFaith per ADS








  Basic

$0.01


$(0.02)

$(0.01)


$(0.01)

$(0.02)

  Diluted

$0.01


$(0.02)

$(0.01)


$(0.01)

$(0.02)









Net income (loss)

$364


$(1,166)

$(368)


$(802)

$(368)

Other comprehensive income,

net of tax








Foreign currency translation

adjustment

1,032


3,974

(3,093)


5,006

(3,366)

Comprehensive income

1,396


2,808

(3,461)


4,204

(3,734)









Less: Comprehensive income

attributable to noncontrolling

interest

(143)


(109)

(159)


(252)

(561)

Comprehensive income (loss)

attributable to TechFaith

$1,253


$2,699

$(3,620)


$3,952

$(4,295)









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)









June 30,

2013


March 31,

2013


December 31,

2012







Assets






Current assets:






Cash and cash equivalents

$257,715


$261,192


$257,950

Accounts receivable

21,665


10,016


8,666

Inventories

8,189


7,316


7,490

Prepaid expenses and other current assets

8,815


12,631


15,678

Total current assets

$296,384


$291,155


$289,784







Property, plant and equipment, net

$47,286


$43,329


$44,084

Land use rights, net

10,694


10,623


10,645

Construction in progress

40,252


38,919


36,530

Acquired intangible assets, net

4,041


3,612


4,061

Goodwill

1,242


1,242


1,242

Total assets

$399,899


$388,880


$386,346







Liabilities and shareholders' equity






Current liabilities:












Accounts payable (including accounts

payable of the consolidated variable

interest entity without recourse to China

Techfaith Wireless Communication

Technology Limited, $nil, $nil and $nil as

of June 30, 2013, March 31, 2013 and

December 31, 2012, respectively)

19,180


10,364


11,140

Accrued expenses and other current

liabilities (including accrued expenses and

other current liabilities of the consolidated

variable interest entity without recourse to

China Techfaith Wireless Communication

Technology Limited, $187, $184 and $184

as of June 30, 2013, March 31, 2013 and

December 31, 2012, respectively)

15,212


15,672


13,464

Advance from customers (including

advance from customers of the

consolidated variable interest entity

without recourse to China Techfaith

Wireless Communication Technology

Limited, $nil, $nil and $nil as of June 30,

2013, March 31, 2013 and December 31,

2012, respectively)

9,885


9,571


9,173

Deferred revenue (including deferred

revenue of the consolidated variable

interest entity without recourse to China

Techfaith Wireless Communication

Technology Limited, $nil, $nil and $nil as

of June 30, 2013, March 31, 2013 and

December 31, 2012, respectively)

2,527


3,351


4,178

Income tax payable (including income tax

payable of consolidated variable interest

entity without recourse to China Techfaith

Wireless Communication Technology

Limited, $22, $21 and $21 as of June 30,

2013, March 31, 2013 and December 31,

2012, respectively)

1,000


916


1,062

Short-term loan (including short-term loan

of the consolidated variable interest entity

without recourse to China Techfaith

Wireless Communication Technology

Limited, $nil, $nil and $nil as of June 30,

2013, March 31, 2013 and December 31,

2012, respectively)

15,350


15,350


15,350

Total current liabilities

$63,154


$55,224


$54,367







Long-term loan

290


290


290







Total liabilities

$63,444


$55,514


$54,657







Shareholders' equity






Paid in capital

$16


$16


$16

Additional paid-in capital

143,399


143,118


142,837

Accumulated other comprehensive

income

51,438


47,769


46,822

Statutory reserve

23,137


23,137


23,137

Retained earnings

92,808


93,778


93,472

Total Techfaith shareholders' equity

$310,798


$307,818


$306,284

Noncontrolling interest

$25,657


$25,548


$25,405

Total shareholders' equity

$336,455


$333,366


$331,689

Total liabilities and shareholders'

equity

$399,899


$388,880


$386,346

 

SOURCE China TechFaith Wireless Technology Limited



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