MACAO, China, May 5 /PRNewswire-FirstCall/ -- Nam Tai Electronics, Inc.('Nam Tai' or the 'Company') (NYSE: NTE) today announced its unaudited resultsfor the first quarter ended March 31, 2008.
KEY HIGHLIGHTS
(In thousands of US Dollars, except per share data, percentages and asotherwise stated)
Quarterly Results (Unaudited) Q1 2008 Q1 2007 YoY(%) Net sales $147,129 $191,571 (23.2) Gross profit $19,530 $17,201 13.5 % of sales 13.3% 9.0% - Operating income $7,812 $7,217 8.2 % of sales 5.3% 3.8% - per share (diluted) $0.17 $0.16 6.3 Net income $28,366 $8,399 237.7 % of sales 19.3% 4.4% - Basic earnings per share $0.63 $0.19 231.6 Diluted earnings per share $0.63 $0.19 231.6 Weighted average number of shares ('000') Basic 44,804 43,911 - Diluted 44,804 44,804 -
In addition to disclosing results determined in accordance with accountingprinciples generally accepted in the United States ('US GAAP') as set forth inthe table above, management utilizes a measure of operating income, net incomeand earnings per share on a non-GAAP basis that excludes certainincome/expenses to better assess operating performance. Those non-GAAPfinancial measures exclude certain items, such as share-based compensationexpenses and infrequent or unusual items such as gain on disposal of shares ofa subsidiary. By disclosing the non-GAAP information, management intends toprovide investors with additional information to analyze the Company'sperformance, core results and underlying trends. Non-GAAP information is notdetermined using US GAAP; therefore, the information is not necessarilycomparable to other companies and should not be used to compare the Company'sperformance over different periods. Non-GAAP information should not be viewedas a substitute for, or superior to, net income or other data prepared inaccordance with US GAAP as measures of our operating results or liquidity.Users of this financial information should consider the types of events andtransactions for which adjustments have been made. See the table below for areconciliation 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 ofshares)
Three months ended March 31, 2008 2007 per per share share millions (diluted) millions (diluted) GAAP Operating Income $7.8 $0.17 $7.2 $0.16 Add back/(Less): - share-based compensation expenses(a) 1.0 0.02 0.1 - Non-GAAP Operating Income $8.8 $0.19 $7.3 $0.16
GAAP Net Income $28.4 $0.63 $8.4 $0.19 Add back/(Less): - share-based compensation expenses(a) 1.0 0.02 0.1 - - gain on sale of shares of a subsidiary(b) (20.2) (0.45) - - Non-GAAP Net Income $9.2 $0.20 $8.5 $0.19
Weighted average number of shares - diluted ('000) 44,804 44,804
Note:
(a) The share-based compensation expenses were mainly in relation tooptions to purchase approximately 20 million share granted by the Company'sHong Kong Stock Exchange listed subsidiary, Nam Tai Electronic & ElectricalProducts Limited (Stock Code : 2633), to certain of its directors andemployees in the first quarter of 2008.
(b) On March 4, 2008, Nam Tai completed the sale of its entire equityinterest in J.I.C. Technology Company Limited ('JIC'), a Hong Kong StockExchange listed subsidiary (Stock Code: 00987), to an independent third party.In this transaction, Nam Tai sold 572,594,978 shares of JIC, representing74.99% of its outstanding share capital for cash of approximately $51 million,which resulted in a gain on disposal of approximately $20 million.
FIRST QUARTER REVIEW
Sales in the first quarter of 2008 decreased 23.2% as compared to the samequarter in 2007 mainly as a consequence of a decline in business from thetelecommunication components assembly ('TCA') product segment. Net sales inthe TCA segment for the first quarter of 2008 decreased by 50.7% compared tothe same quarter of 2007. Our TCA product segment is primarily dependent onthe mobile phone market. The Company, together with one of its indirectcustomers, suffered a substantial drop in sales volume of its devices used inmobile phones, a trend Nam Tai began experiencing in 2007 and which hascontinued and accelerated as a result of declining demand experienced in themobile phone market and persistent pressure to lower unit prices. Thechallenging environment in the TCA segment is expected to continue and mayincrease in the coming quarters. Although the business environment remainscompetitive and difficult, from our efforts focusing on sales in othersegments, sales of our LCD products ('LCDP') segment grew by 7.2% during thefirst quarter and sales in our consumer electronics and communication products('CECP') segment grew by 27.9% during the first quarter, the latterparticularly from increased sales of home entertainment products, opticalproducts and educational devices. By continuing to concentrate our efforts toimproving manufacturing efficiencies, broadening our product offerings anddiversifying our customer base our gross profit margin improved over 4 %, to13.3% in the first quarter of 2008 from 9.0% in the first quarter of 2007.Gross profit in the first quarter of 2008 improved by over $2.3 million to$19.5 million, from $17.2 million in the first quarter of 2007, a 13.5%increase. Our ability to improve and increase our gross profit margins in aperiod of declining revenues appears to indicate that certain of these effortshave been successful and have helped us to manage operations in a toughbusiness environment and positions us to maintain profitability or evenimprove it with resumption of our revenue growth.
Net sales in the first quarter of 2008 were $147.1 million, a decrease of23.2% as compared to $191.6 million in the first quarter of 2007. Operatingincome in the first quarter of 2008 was $7.8 million, or $0.17 per share(diluted), compared to operating income of $7.2 million, or $0.16 per share(diluted) in the first quarter of 2007. Net income in the first quarter of2008 was $28.4 million (of which approximately $20.2 million resulted from ona gain on our sale of our equity interest in JIC), compared to net income of$8.4 million in the first quarter of 2007. Basic and diluted earnings pershare in the first quarter of 2008 were $0.63 per share (of which $0.45 pershare resulted from the gain on our sale of our equity interest in JIC),compared to earnings per share of $0.19 in the first quarter of 2007.
The Company's financial position remained strong at the end of the firstquarter, with $267.2 million cash and cash equivalents at March 31, 2008.During the first quarter, we made capital expenditures of $1.9 million, made aprepayment for the purchase of land of $0.7 million and paid fourth quarterdividends of $9.3 million to shareholders on January 21, 2008.
NON-GAAP FINANCIAL INFORMATION
Non-GAAP operating income for the first quarter of 2008 was $8.8 million,or $0.19 per share (diluted), compared to non-GAAP operating income of $7.3million, or $0.16 per share (diluted), in the first quarter of 2007. Non-GAAPnet income for the first quarter of 2008 increased by 8.2% over the firstquarter of 2007 to $9.2 million, or $0.20 per share (diluted), compared to$8.5 million, or $0.19 per share (diluted), in the first quarter of 2007.
COMPANY OUTLOOK
The trends of continuing and increasing pricing pressure and volatility indemand from the mobile phone industry supply chain are expected to continueinto the coming quarters. Recent global adverse economic conditions (which, webelieve, have been primarily driven by the sub-prime crisis in US) mayaggravate and exacerbate the difficult business environment we currently faceand could result in negative effects to our results of operations over thenext several quarters. Additionally, we will also have to face issues such asthe continuing appreciation of the exchange rate of the Renminbi to the U.S.dollar, the effects of changing tax and labor laws in the People's Republic ofChina ('PRC'), shortages of electricity supply and increases in overheadexpenses resulting from inflation. We plan to respond to these challenges bycontinuing our focus on realigning our production capacity to optimizeoperating efficiencies, broadening our product offerings and diversifying ourcustomer base. As the passage of time allows our personnel to adjust to theinfrastructure changes resulting from the internal reorganization that wecompleted at the end of 2007, we expect to realize benefits from a simplerorganizational structure, which we believe can foster a more efficient andeffective exchange of know-how and technology among our respective groupcompanies, reduced overhead costs and facilitate stronger management controls.Although our revenue decreased in the first quarter of 2008 both sequentiallyand from the same quarter of 2007, we were still able to improve our grossprofit margins. We are still cautiously optimistic about our business levelsin 2008. In the second quarter of 2008, in aggregate we are anticipatingsteady business levels. Longer-term, the Company will strive to improveprofitability in our core operations, especially after capacity increases fromproduction in our new factory facilities when they become operational.
During the first quarter of 2008, we paid approximately $0.7 million ofcosts related to our land purchase in Shenzhen Guangming Hi-Tech IndustrialPark, satisfying in full the land payments and related costs required for thatproject. In April 2008, we also received the land use right certificate onthis land from the PRC Bureau of State Land and Resources. In January 2008, webegan construction of a new manufacturing facility on one of the two sites inWuxi, Jiangsu Province that we purchased in December 2006 and the tenderreview process for mechanical and electrical foundation construction on thatproject is in progress. We hope to be in a position to begin mass productionat the new facility in early to mid-2009.
SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FIRST QUARTER OF 2008
1. Quarterly Sales Breakdown (In thousands of US Dollars, except percentage information)
Quarter YoY(%) YoY(%) (Quarterly 2008 2007 (Quarterly) accumulated) 1st Quarter 147,129 191,571 (23.2) (23.2) 2nd Quarter - 197,830 - - 3rd Quarter - 204,485 - - 4th Quarter - 186,936 - - Total 147,129 780,822
2.
