MACAO, China, Aug. 4 /PRNewswire-FirstCall/ -- Nam Tai Electronics, Inc.
('Nam Tai' or the 'Company') (NYSE: NTE) today announced its unaudited results
for the second quarter ended June 30, 2008.
KEY HIGHLIGHTS
(In thousands of US Dollars, except per share data, percentages and as
otherwise stated)
Quarterly Results Half-Year Results
Q2 2008 Q2 2007 YoY(%) 1H2008 1H2007 YoY(%)
Net sales $146,168 $197,830 (26.1) $293,297 $389,401 (24.7)
Gross profit $20,762 $22,745 (8.7) $40,292 $39,946 0.9
% of sales 14.2% 11.5% - 13.7% 10.3% -
Operating income $8,608 $11,834 (27.3) $16,420 $19,051 (13.8)
% of sales 5.9% 6.0% - 5.6% 4.9% -
per share
(diluted) $0.19 $0.26 (26.9) $0.37 $0.43 (14.0)
Net income $11,804 $38,805 (69.6) $40,170 $47,204 (14.9)
% of sales 8.1% 19.6% - 13.7% 12.1% -
Basic earnings
per share $0.26 $0.87 (70.1) $0.90 $1.06 (15.1)
Diluted earnings
per share $0.26 $0.87 (70.1) $0.90 $1.05 (14.3)
Weighted average
number of
shares ('000')
Basic 44,804 44,804 - 44,804 44,360 -
Diluted 44,811 44,806 - 44,807 44,805 -
In addition to disclosing results determined in accordance with accounting
principles generally accepted in the United States ('US GAAP') as set forth in
the table above, management utilizes a measure of operating income, net income
and earnings per share on a non-GAAP basis that excludes certain income and
expenses to better assess operating performance. Those non-GAAP financial
measures exclude certain items, such as share-based compensation expenses and
infrequent or unusual items such as gain on disposal of subsidiaries' shares
and gain on disposal of marketable securities. By disclosing the non-GAAP
information, management intends to provide investors with additional
information to analyze the Company's performance, core results and underlying
trends. Non-GAAP information is not determined using US GAAP; therefore, the
information is not necessarily comparable to other companies and should not be
used to compare the Company's performance over different periods. Non-GAAP
information should not be viewed as a substitute for, or superior to, net
income or other financial data prepared in accordance with US GAAP as measures
of our operating results or liquidity. Users of this financial information
should consider the types of events and transactions for which adjustments
have been made. See the table below for a reconciliation 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 of
shares)
Three months ended
June 30,
2008 2007
per share per share
millions (diluted) millions (diluted)
GAAP Operating Income $8.6 $0.19 $11.8 $0.26
Add back:
-share-based compensation
expenses(a) 0.2 0.01 0.2 0.01
Non-GAAP Operating Income $8.8 $0.20 $12.0 $0.27
GAAP Net Income $11.8 $0.26 $38.8 $0.87
Add back/(Less):
-share-based compensation
expenses(a) 0.2 0.01 0.2 0.01
-gain on sale of
subsidiaries' shares (b) - - (0.4) (0.01)
-other income recovered
from Tele-Art Inc. (in
liquidation)(c) (2.9) (0.07) - -
-gain on disposal of
marketable securities - - (28.0) (0.63)
Non-GAAP Net Income $9.1 $0.20 $10.6 $0.24
Weighted average number of
shares - diluted ('000) 44,811 44,806
Six months ended
June 30,
2008 2007
per share per share
millions (diluted) millions (diluted)
GAAP Operating Income $16.4 $0.37 $19.1 $0.42
Add back:
-share-based compensation
expenses(a) 1.2 0.03 0.3 0.01
Non-GAAP Operating Income $17.6 $0.40 $19.4 $0.43
GAAP Net Income $40.2 $0.90 $47.2 $1.06
Add back/(Less):
-share-based compensation
expenses(a) 1.2 0.03 0.3 0.01
-gain on sale of
subsidiaries' shares (b) (20.2) (0.45) (0.4) (0.01)
-other income recovered
from Tele-Art Inc. (in
liquidation)(c) (2.9) (0.07) - -
-gain on disposal of
marketable securities - - (28.0) (0.63)
Non-GAAP Net Income $18.3 $0.41 $19.1 $0.43
Weighted average number of
shares - diluted ('000) 44,807 44,805
Note:
(a) The share-based compensation expenses included approximately $0.2
million attributable to options to purchase 75,000 shares granted in the
second quarter of 2008 to non-employee directors in accordance with the
Company's practice of making annual option grants to its non-employee
directors upon their election for the ensuing year and approximately $1.0
million principally attributable to options to purchase approximately 20
million shares granted by the Company's Hong Kong Stock Exchange- listed
subsidiary, Nam Tai Electronic & Electrical Products Limited ('NTEEP')(Stock
Code : 2633), to certain of its executive directors and employees in the
first quarter of 2008.
(b) On March 4, 2008, Nam Tai completed the sale of its entire equity
interest in J.I.C. Technology Company Limited ('JIC'), a Hong Kong Stock
Exchange listed subsidiary (Stock Code: 00987), to an independent third party.
In this transaction, Nam Tai sold 572,594,978 shares of JIC, representing
74.99% of its outstanding share capital for cash of approximately $51 million,
which resulted in a gain on disposal of approximately $20 million.
(c) A total amount of approximately $2.9 million of other income in the
Company's financial statements for the second quarter of 2008. This amount
represents Nam Tai's share of proceeds realized from the disposal for the
account of Tele-Art, Inc.'s liquidator of 477,319 Nam Tai shares owned by
Tele-Art, Inc. (in liquidation)('Tele-Art') and was paid in settlement of
amounts previously funded by Nam Tai in connection with Tele-Art's liquidation
and in partial satisfaction of judgments in favor of Nam Tai against Tele-Art.
SECOND QUARTER REVIEW
The business environment in Nam Tai's product sectors remains difficult
and extremely competitive. Net sales in the second quarter of 2008 were $146.2
million, a decrease of 26.1% as compared to the sales of $197.8 million in the
second quarter of 2007, mainly as a consequence of the continuing decline in
business from the Company's telecommunication components assembly ('TCA')
segment. Net sales in the TCA segment for the second quarter of 2008
decreased by 48.0% compared to the same quarter of 2007. Our TCA segment is
primarily dependent on the mobile phone market. The Company suffered another
substantial drop in sales volume of its devices used in mobile phones, a trend
Nam Tai began experiencing in 2007 and which has continued and accelerated as
a result of declining demand experienced in the mobile phone market and
persistent pressure to lower unit prices. The challenging environment in the
TCA segment is expected to continue and may increase in the coming quarters.
Sales of products in our liquid crystal display product ('LCDP') segment and
sales from our consumer electronics and communication products ('CECP')
segment also dropped by 6.1% and 3.1% respectively, during the second quarter
of 2008 as compared to sales of the corresponding quarter of 2007. The
decrease in sales in our LCDP segment was mainly a consequence of the drop of
sales of our LCD modules products. Sales in our CECP segment were affected by
a decrease in sales of mobile phone accessories of approximately 28% from
comparable sales in the second quarter of 2007, offset by the increase in
sales of our home entertainment devices amounting to approximately 22% from
2007 second quarter sales.
The Company's gross profit margin in the second quarter of 2008 improved
by approximately 2.7 %, to 14.2% in the second quarter of 2008 compared to
11.5% in the second quarter of 2007. Management attributes this increase in
gross profit margins to it's program selectivity, with strong emphasis on
profitability, and the effect of efforts to improve manufacturing
efficiencies. We will continue our efforts in improving manufacturing
efficiencies, broadening our product offerings and diversifying our customer
base which we expect will help to manage operations in the ongoing tough
business environment. Gross profit in the second quarter of 2008 was $20.8
million, a decrease of 8.7% as compared to $22.7 million in the second quarter
of 2007, primarily resulting from the decline in 2008 sales.
Operating income in the second quarter of 2008 was $8.6 million, or $0.19
per share (diluted), compared to operating income of $11.8 million, or $0.26
per share (diluted) in the second quarter of 2007. Net income in the second
quarter of 2008 was $11.8 million, compared to net income of $38.8 million (of
which, approximately $28.0 million resulted from a net gain on disposal of
marketable securities) in the second quarter of 2007. Basic and diluted
earnings per share in the second quarter of 2008 were $0.26 per share,
compared to $0.87 in the second quarter of 2007.
For the six months ended June 30, 2008, Nam Tai's net sales were $293.3
million, a decrease of 24.7% as compared to $389.4 million in the same period
last year. Gross profit was $40.3 million, an increase of 0.9% as compared to
$40.0 million in the same period last year. Operating income for the first six
months in 2008 decreased 13.8% to $16.4 million, or $0.37 per share (diluted),
compared to $19.1 million, or $0.43 per share (diluted), in the same period
last year. Net income was $40.2 million, or $0.90 per share (diluted), a
decrease of 14.9% as compared to $47.2 million or $1.05 per share (diluted) in
the same period last year.
The Company's financial position remains strong and net cash provided by
operating activities in the second quarter was $30.8 million. The Company
ended the quarter with $271.9 million cash and cash equivalents on June 30,
2008 even after capital expenditures of $5.8 million and cash dividends of
$9.8 million paid to shareholders of the Company and $6.0 million paid to
minority shareholders of NTEEP.
NON-GAAP FINANCIAL INFORMATION
Non-GAAP operating income for the second quarter of 2008 was $8.8 million,
or $0.20 per share (diluted), compared to non-GAAP operating income of $12.0
million, or $0.27 per share (diluted), in the second quarter of 2007. Non-GAAP
net income for the second quarter of 2008 decreased by 14.2% over the second
quarter of 2007 to $9.1 million, or $0.20 per share (diluted), compared to
$10.6 million, or $0.24 per share (diluted), in the second quarter of 2007.
Non-GAAP operating income for the first six months in 2008 was $17.6
million, or $0.40 per share (diluted), compared to non-GAAP operating income
of $19.4 million, or $0.43 per share (diluted) for the same period last year.
Non-GAAP net income for the first six months in 2008 was $18.3 million or
$0.41 per share (diluted), a decrease of 4.2% as compared to $19.1 million, or
$0.43 per share (diluted), for the same period last year.
COMPANY OUTLOOK
Recent global adverse economic conditions (which, we believe, have been
primarily driven by the sub-prime crisis in the US) aggravated the Company's
results in the past quarter and may exacerbate the difficult business
environment we currently face and could result in negative effects to our
results of operations over the next several quarters. Additionally, we also
face issues such as the continuing appreciation of the exchange rate of the
renminbi to the US dollar, the effects of changing tax and labor laws in the
People's Republic of China ('PRC'), shortages of electricity supply and
increases in overhead expenses resulting from inflation.
To respond to the challenges surfacing from the current business
environment, management has continued to focus efforts to optimize operating
efficiencies by realigning production capacity to higher margin product
offerings and has sought to diversify Nam Tai's customer base.
