NAM TAI ELECTRONICS, INC. 2006 Sales Up 9%, Operating Income Down 19%, EPS Down 22%; Q4 2006 Sales Down 7%, Operating Income Down 118%, EPS Down 117%17 February 2007
Nam Tai Electronics, Inc. ("Nam Tai" or the "Company") (NYSE: NTE) today announced its unaudited results in the fourth quarter and twelve months ended December 31, 2006.
KEY HIGHLIGHTS
(In thousands of US Dollars, except per share data, percentages and as otherwise stated)
Quarterly Results Twelve Months Results
Q4 2006 Q4 2005 YoY(%) 12M 2006 12M 2005 YoY(%)
Net sales 229,647 247,178 -7.1 870,174 797,237 9.1
Gross profit 22,010 25,343 -13.2 86,221 92,923 -7.2
% of sales 9.6% 10.3% - 9.9% 11.7% -
Operating (loss)
income (a) (2,604) 14,532 -117.9 42,480 52,656 -19.3
% of sales (1.1)% 5.9% - 4.9% 6.6% -
per share
(diluted) $(0.06) $0.33 -118.2 $0.97 $1.22 -20.5
Net (loss)
income (a) (2,324) 12,700 -118.3 40,756 51,306 -20.6
% of sales (1.0)% 5.1% - 4.7% 6.4% -
Basic (loss)
earnings per
share $(0.05) $0.29 -117.2 $0.93 $1.19 -21.8
Diluted (loss)
earnings per
share $(0.05) $0.29 -117.2 $0.93 $1.19 -21.8
Weighted average
number of shares
('000')
Basic 43,787 43,376 43,702 42,945
Diluted 44,251 43,532 43,858 43,169
Note: (a) See GAAP To Non-GAAP Reconciliation on page 2.
In addition to disclosing results determined in accordance with accounting principles generally accepted in the United States ("US GAAP") above, management utilizes a measure of operating income, net income and earnings per share on a non-GAAP basis that excludes certain income/expenses as above to better assess operating performance. Those non-GAAP financial measures exclude certain items, such as share-based compensation expenses, losses arising from the judgment to reinstate redeemed shares (see discussion under "Tele-Art Litigation" below), restructuring costs, realized gain or loss on the disposal of marketable securities, investments or interests in subsidiaries, impairment loss on marketable securities or goodwill, or other infrequent or unusual items. Please see page 2 for the reconciliation of GAAP operating to non-GAAP operating income and GAAP net income and earnings per share to non-GAAP net income and earnings per share, and page 8 for a detailed discussion of management's use of non-GAAP financial information.
GAAP TO NON-GAAP RECONCILIATION
(In millions of US Dollars, except for per share (diluted) and numbers of
shares)
Three months ended
December 31,
2006 2005
million per share million per share
(diluted) (diluted)
GAAP Operating (Loss)
Income (2.6) (0.06) 14.5 0.33
Add back/(Less):
- Gain on disposal of
asset held for sale - - - -
- Share-based
compensation expenses 0.1 - - -
- Severance expenses in
relation to the
restructuring of
Hong Kong
subsidiaries - - - -
- Losses arising from
the judgment to
reinstate redeemed
shares - Tele-Art(b) 14.5 0.33 - -
Non-GAAP Operating
Income (a) 12.0 0.27 14.5 0.33
GAAP Net (Loss) Income (2.3) (0.05) 12.7 0.29
Add back/(Less):
- Gain on disposal of
asset held for sale - - - -
- Share- based
compensation expenses 0.1 - - -
- Loss on marketable
securities arising
from split share
structure reform - - - -
- Severance expenses in
relation to the
restructuring of
Hong Kong
subsidiaries - - - -
- Gain from disposal of
the Company's entire
stake in its
investment in an
affiliated company
- Alpha Star - - - -
- Gain on sales of
subsidiaries' shares - - - -
- Realized losses on the
partial disposal of
marketable securities
in TCL Communication - - 2.3 0.05
- Impairment loss on
marketable securities - - - -
- Expenses in relation
to the termination of
a potential listing of
one of the Company's
subsidiaries in
Hong Kong - - - -
- Losses arising from
the judgment to
reinstate redeemed
shares - Tele-Art(b) 14.5 0.33 - -
Non-GAAP Net Income (a) 12.3 0.28 15.0 0.34
Weighted average number
of shares-diluted
('000) 44,251 43,532
Twelve months ended
December 31,
2006 2005
million per share million per share
(diluted) (diluted)
GAAP Operating (Loss)
Income 42.5 0.97 52.7 1.22
Add back/(Less):
- Gain on disposal of
asset held for sale (9.3) (0.21) - -
- Share-based
compensation
expenses 0.9 0.02 - -
- Severance expenses
in relation to the
restructuring of
Hong Kong
subsidiaries - - 1.0 0.02
- Losses arising from
the judgment to
reinstate redeemed
shares - Tele-Art(b) 14.5 0.33 - -
Non-GAAP Operating
Income (a) 48.6 1.11 53.7 1.24
GAAP Net (Loss) Income 40.8 0.93 51.3 1.19
Add back/(Less):
- Gain on disposal of
asset held for sale (9.3) (0.21) - -
- Share- based
compensation expenses 0.9 0.02 - -
- Loss on marketable
securities arising
from split share
structure reform 1.3 0.03 - -
- Severance expenses in
relation to the
restructuring of
Hong Kong subsidiaries - - 1.0 0.02
- Gain from disposal of
the Company's entire
stake in its
investment in an
affiliated company
- Alpha Star - - (3.6) (0.08)
- Gain on sales of
subsidiaries' shares - - (10.1) (0.23)
- Realized losses on the
partial disposal of
marketable securities
in TCL Communication - - 3.7 0.08
- Impairment loss on
marketable securities - - 6.5 0.15
- Expenses in relation
to the termination of
a potential listing of
one of the Company's
subsidiaries in
Hong Kong - - 1.3 0.03
- Losses arising from
the judgment to
reinstate redeemed
shares - Tele-Art(b) 14.5 0.33 - -
Non-GAAP Net Income (a) 48.2 1.10 50.1 1.16
Weighted average number
of shares-diluted
('000) 43,858 43,169
Note:
(a) Please see page 8 for a detailed discussion of management's use of
non-GAAP financial information.
(b) Losses arising from the judgment to reinstate redeemed shares were
determined for the three and twelve months ended December 31, 2006
after taking into account the total issue price of the 1,017,149
redeemed shares at the market price of Nam Tai shares on November 20,
2006 (the date of the Privy Council judgment); the estimated costs and
expenses of BOC and former Tele-Art's liquidator that Nam Tai expects
will be claimed in connection with the Privy Council litigation
proceedings; and a reversal of amounts Nam Tai previously reserved in
its financial statements for potential losses to be incurred as result
of the share redemptions (see discussion under "Tele-Art Litigation"
below).
FOURTH QUARTER AND YEAR END REVIEW
The electronic manufacturing services industry in which the Company operates experienced a challenging year in 2006 and Nam Tai was not immune. Nam Tai's fourth quarter 2006 net sales declined as a result of decrease in sales from telecommunication components assembly. Fourth quarter operating income declined as a consequence of competitive pricing pressures requiring us to lower unit prices. Although for the full year of 2006 Nam Tai experienced growth in business volume from existing customers, this growth was insufficient to offset the adverse effects of pressure to reduce unit prices, resulting in lower operating income and net profit on both a GAAP and non-GAAP basis for 2006 compared to 2005.
Nam Tai's net sales in the fourth quarter of 2006 were $229.6 million, a decrease of 7.1% as compared to $247.2 million in the fourth quarter of 2005. Operating loss in the fourth quarter of 2006, which took into account $14.5 million of non-cash losses arising from the judgment to reinstate the Redeemed Shares (as discussed under "Tele-Art litigation" below) was $2.6 million, or $0.06 per share (diluted), a decrease of 117.9% as compared to operating income of $14.5 million, or $0.33 per share (diluted) for the same period last year. Net loss in the fourth quarter of 2006 was $2.3 million, a decrease of 118.3% as compared to $12.7 million in the fourth quarter of 2005.
Non-GAAP operating income in the fourth quarter of 2006 was $12.0 million, or $0.27 per share (diluted), a decrease of 17.2% as compared to Non-GAAP operating income of $14.5 million, or $0.33 per share (diluted) for the same period last year. Non-GAAP net income in the fourth quarter of 2006 was $12.3 million, or $0.28 per share (diluted), a decrease of 18.0% as compared to $15.0 million, or $0.34 per share (diluted), in the fourth quarter of 2005.
For the year ended December 31, 2006, Nam Tai's net sales were $870.2 million, representing its eighth consecutive year of top-line growth, and an increase of 9.1% as compared to $797.2 million in the same period last year. Operating income for the year ended December 31, 2006 was $42.5 million, or $0.97 per share (diluted), a decrease of 19.3.% as compared with $52.7 million, or $1.22 per share (diluted), in 2005. Net income for the year ended December 31, 2006 was $40.8 million, or $0.93 per share (diluted), a decrease of 20.6% as compared to $51.3 million or $1.19 per share (diluted) in 2005.
Non-GAAP operating income for the full year of 2006 was $48.6 million, or $1.11 per share (diluted), a decrease of 9.5% as compared to Non-GAAP operating income of $53.7 million, or $1.24 per share (diluted) for the full year of 2005. Non-GAAP net income for the full year of 2006 was $48.2 million, or $1.10 per share (diluted), a decrease of 3.8% as compared to $50.1 million, or $1.16 per share (diluted), for the full year of 2005.
The Company's financial position remains strong and net cash provided by operating activities in the fourth quarter of 2006 was $19.8 million. The Company ended the quarter with $221.1 million cash on hand after capital expenditures of $6.4 million and third quarter dividends of $16.6 million paid to shareholders on October 21, 2006.
COMPANY OUTLOOK
Nam Tai's management team remains focused on growing both sales and profitability. The Company plans to continue our strategy of customer base expansion and products diversification. In particular, management expects that sophisticated products requiring high technology manufacturing capabilities will drive our growth. Although continuing competition and resulting pricing pressures from customers is expected to remain a significant challenge for the electronics manufacturing services industry in the coming years, expansion plans are in progress to further the vertical integration capabilities of our component sub-assembly business, with the goal of continuing to improve our production technology, and to increase capacity to satisfy expected growth in business volume.
Nam Tai's expansion plans to increase capacity include the construction of additional manufacturing facilities in Wuxi and Shenzhen, the People's Republic of China ("PRC"). In December 2006, the Company paid $1.3 million to acquire the land in Wuxi upon which its new facilities are to be built. We are working with our building consultants in the design of the facilities. We currently expect that construction of our Wuxi manufacturing facilities and production of flexible printed circuit ("FPC") in them to commence in mid- 2007 and at the end of 2008, respectively.
Nam Tai is in progressing on schedule with its plans to implement FPC production in our existing facilities in Shenzhen. Management expects that this new capability in Shenzhen will enhance Nam Tai's competitiveness by enabling it to offer customers more diversified services. Our products have obtained the Underwriters Laboratories (UL) Standards for Safety. Our goal is to begin mass production of FPCs at our Shenzhen facilities in the second quarter of 2007.
"Despite a challenging 2006, which we expect to continue in 2007, our target of 12% sales growth for 2007 remains unchanged. With our aggressive expansion plans and strong customer relationships, I am optimistic about the long-term prospects of the Company," said Mr. Warren Lee, Nam Tai's Chief Executive Officer.
SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FOURTH QUARTER OF 2006
1. Quarterly Sales Breakdown
(In thousands of US Dollars, except percentage information)
Quarter 2006 2005 YoY(%) YoY(%)
(Quarterly) (Quarterly
accumulated)
1st Quarter 208,358 156,923 32.8 32.8
2nd Quarter 213,653 185,277 15.3 23.3
3rd Quarter 218,516 207,859 5.1 16.4
4th Quarter 229,647 247,178 -7.1 9.1
Total 870,174 797,237 - -
2. Breakdown of Net Sales Breakdown by Product Segment (as a percentage of Total Net Sales)
2006 2005
Segment Q4 YTD Q4 YTD
(%) (%) (%) (%)
Consumer Electronics and
Communication Products:
- Consumer Electronics
and Communication
Products 21% 20% 16% 20%
- Software Development
Services 0% 1% 1% 1%
Telecommunication
Components Assembly 72% 72% 77% 72%
Parts & Components:
- LCD Products 7% 7% 6% 7%
100% 100% 100% 100%
3. Key Highlights of Financial Position
As at December 31,
2006 2005
Cash on hand (a) $221.1 million $213.8 million
Marketable securities $24.4 million $13.3 million
Ratio of cash (a) to current liabilities 1.36 1.30
Current ratio 2.46 2.42
Ratio of total assets to total liabilities 3.23 3.10
Return on equity 13.0% 16.7%
Ratio of total liabilities to equity 0.52 0.54
Debtors turnover 49 days 58 days
Inventory turnover 14 days 16 days
Average payable period 59 days 63 days
Note: (a) Includes cash equivalents.
4. Tele-Art Litigation
As previously announced, judgment was rendered on November 20, 2006 by the Lords of the Judicial Committee of the Privy Council of the United Kingdom (the "Privy Council") declaring that the redemptions by Nam Tai of its common shares beneficially owned by Tele-Art Inc. ("Tele-Art") on January 22, 1999 and August 12, 2002 were nullities and that the register of members of Nam Tai (i.e., Nam Tai's shareholders' register) should be rectified to reinstate the redeemed shares together with any other shares which have since accrued by way of exchange or dividend. Nam Tai received the Order from the Privy Council on January 9, 2007 to rectify the share register of Nam Tai by registering such 1,017,149 Nam Tai shares (the "Redeemed Shares") in the name of Bank of China (Hong Kong) Limited ("BOC"). Since the court judgment was determined in 2006, Nam Tai accounted for the obligation to reinstate the Redeemed Shares at their fair value (i.e. market closing price) on November 20, 2006, the date of the judgment. Based on the proceedings with respect to the liquidation of Tele- Art, any proceeds from sales of the Redeemed Shares by BOC after the deduction of valid claims of BOC and other costs and expenses of the liquidation of Tele-Art, together with any Redeemed Shares remaining after BOC's sales, are to be shared among Nam Tai and two other unsecured creditors on a pro-rata basis up to the amount of their valid claims against Tele-Art. Nam Tai has been advised that of the unsecured claims against Tele-Art in the liquidation, approximately 95 percent consist of Nam Tai's judgment against Tele-Art that the High Court of Justice in the British Virgin Islands awarded to Nam Tai in the amount of $34 million, plus interest, that resulted from damages Nam Tai suffered from a 1993 injunction obtained by Tele-Art. The remainder of the unsecured claims against Tele-Art in the liquidation consist of Nam Tai's claims for other amounts owed to it by Tele-Art, which aggregate to approximately 4 percent of the total unsecured claims in the liquidation, with the remainder of the aggregate unsecured claims consisting of those of the two other unsecured creditors. The amount actually recoverable, if any, by Nam Tai will depend on the price realized by the liquidator when Nam Tai's Redeemed Shares are sold to satisfy creditors' claims against Tele-Art and thus is dependent on the market price at the time of sale as well as the actual amounts of the claims of BOC and the other creditors against Tele-Art and ultimate expenses of the liquidator. Because of uncertainties relating the timing of BOC's actions with respect to the disposition of the Redeemed Shares, including the timing of any sales and the amount of proceeds to be realized, the actual amount of BOC's claims, including interest, costs and expenses, whether BOC actually remits any excess proceeds or Redeemed Shares to the liquidator for the benefit of Tele-Art's unsecured creditors, the uncertain effect of any claims that Nam Tai may assert against BOC, the possibility that Nam Tai will be forced to seek further recourse from the courts in an effort to protect its position and the timing, cost and uncertain success of such recourse, Nam Tai has determined not to record any value to a potential recovery on its unsecured claims against Tele-Art's estate in liquidation in its financial statements until the prospects of recovery, if any, becomes reasonably certain to Nam Tai. Although there can no assurances, if future events do occur that make the prospects of Nam Tai's recovery of its claims against Tele-Art's liquidation estate reasonably certain, Nam Tai will record the appropriate amount as income in its financial statements in accordance with US GAAP.
Losses of $14.5 million arising from Nam Tai's reinstatement of the Redeemed Shares were determined for the three and twelve months ended December 31, 2006 after taking into account the market price of Nam Tai shares on November 20, 2006 (the date of the Privy Council judgment); the estimated costs and expenses of BOC and former Tele-Art's liquidator that Nam Tai expects will be claimed in connection with the Privy Council litigation proceedings ; and a reversal of amounts Nam Tai previously reserved in its financial statements for potential losses to be incurred as result of the share redemptions. Nam Tai may incur additional losses in the future as a result of its reinstatement of the Redeemed Shares to the extent that the costs and expenses of BOC and/or former Tele-Art's liquidator increase beyond the amounts estimated for purposes of determining the $14.5 million loss provision.
5. Developments in Class Action Litigation
As previously announced and reported, Nam Tai and certain of its directors are defendants in two consolidated class actions wherein the named plaintiffs purport to represent a putative class of persons who purchased the common stock of Nam Tai from July 29, 2002 through February 18, 2003, and have made claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and alleged that misrepresentations and/or omissions were made during the alleged class period concerning the partial reversal of an inventory provision and a charge to goodwill related to Nam Tai's LCD Products segment. Oral argument on the plaintiffs' motion for class certification was held on February 1, 2007 but the court took the matter under advisement and had not ruled on the motion as of the close of business on February 9, 2007.
FOURTH QUARTER RESULTS ANALYST CONFERENCE CALL
The Company will hold a conference call on Monday, February 12, 2007 at 8:00 a.m. Eastern Time for analysts to discuss the fourth quarter results with Nam Tai's management. Shareholders, media, and interested investors are invited to listen to the live conference over the internet by going to http://www.namtai.com and clicking on the conference call link (under events) or over the phone by dialing (651) 291-0900 just prior to its start time.
DIVIDENDS
The record date for the first quarter dividend of $0.21 per share is March 31, 2007 and the payment date is on or before April 21, 2007.
Schedule for quarterly dividends are as follows:
Quarterly Payment Record Date Scheduled Payment Date Dividend
(per share)
Q1/07 March 31, 2007 On or before April 21, 2007 $0.21
Q2/07 June 30, 2007 On or before July 21, 2007 $0.21
Q3/07 September 30, 2007 On or before October 21, 2007 $0.21
Q4/07 December 31, 2007 On or before January 21, 2008 $0.21
FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE
Statements concerning the Company's outlook and rate of sales growth for 2007, expected growth in business volume, the sufficiency of Nam Tai's management's optimism regarding Nam Tai's long-term prospects, management's estimates of when its expansion projects to increase capacity will begin construction or will be available for production among other statements in this press release, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by the use of words like "believes," "intends," "expects," "plans" or "planned," "may," "will," "should" or "anticipates," or the negative equivalents of those words or comparable terminology, and involve risks and uncertainties. Such statements are based on current expectations and assumptions and reflect our views with respect to future events and may not actually occur during the periods indicated or at all and are not a guarantee of our future performance. These forward-looking statements are, by their nature, subject to risks, uncertainties and other factors that could cause the actual results to differ materially from future results expressed or implied by the forward-looking statements in this press release.
Whether the Company's outlook and sales growth rate it expects in 2007 will be met, fall short or be exceeded, whether management's optimism regarding Nam Tai's long-term prospects will realized, whether the Company can or will be able to meet the stages of its planned expansion by the dates currently expected, whether expectations of increased sales volumes will be realized or whether increased orders, if received, can be handled by the planned increases in capacity, whether Nam Tai capital expenditures to achieve expanded capacity will result in material increases in revenues or result in increased or any profit, will depend upon future sales orders, Nam Tai's ability to contain manufacturing costs and the actual level of capital expenditures required for each of the planned expansion projects. Nam Tai's growth, operating income, available cash, cash flows and levels of capital expenditures may be adversely affected by numerous factors including Nam Tai's dependence on a few large customers; intense competition in the electronics industry in which the Company participates; Nam Tai being subject to continuing pressure on its margins; its operating results fluctuating and lacking predictability; risks relating to its doing business in the PRC such as arising from changes in governmental policies, taxation, trade regulation, and currency exchange rates; the timing and amount of significant orders from customers; delays in product development and related product release schedules; obsolete inventory or product returns; warranty and other claims on products; technological shifts; the availability of competitive products of comparable quality at prices below Nam Tai's prices; maturing product life cycles; concessions Nam Tai may make on product sale terms and conditions; implementation of operating cost structures that align with revenue growth, if any; the financial condition of Nam Tai's customers and vendors and those companies in which Nam Tai holds marketable securities or other investments; the availability and increasing costs of materials and other components needed to manufacture its products; adverse results in litigation, including its on- going securities class action litigation; potential shortages of materials or skilled labor needed for its planned expansion projects or for its existing facilities; unforeseen engineering problems, work stoppages, weather interference, flood, earthquake or other acts of God, delays in obtaining or failure to obtain necessary permits from regulatory authorities needed to permit expansion or continue existing operations, other unexpected project delays or unanticipated costs increases; risks of expanding into new areas of the PRC where Nam Tai's has not yet conducted business, diversion of management's attention to expansion and its management to new locations and to other business concerns; the impact of legislative actions, higher insurance costs and potential new accounting pronouncements; a worsening of relations between the PRC and the United States or Taiwan; the effects of terrorist activity and armed conflict such as disruptions in general economic activity and changes in Nam Tai's operations and security arrangements; the effects of travel restrictions and quarantines associated with major health problems, such as the Severe Acute Respiratory Syndrome or Bird Flu, on general economic activity; or other changes in general economic conditions that affect demand for Nam Tai's products. In addition, factors, among others, that could cause the market price of our shares to decline in the future could include the failure of our growth, if any, or operating results or those of our competitors or customers to meet the expectations of public market analysts and investors who follow the electronics manufacturing services, or EMS, industry, the sale or availability for sale, of the Redeemed Shares by BOC or Tele-Art's liquidator to satisfy the claims of Tele-Art's creditors or one or more of the factors discussed in Item 3. Key Information - Risk Factors in our Annual Report on Form 20-F for the year ended December 31, 2005 as filed with the Securities and Exchange Commission ("SEC").
For further information regarding risks and uncertainties associated with Nam Tai's business, please refer to the "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Risk Factors" sections of Nam Tai's SEC filings, including, but not limited to, its annual reports on Form 20-F, copies of which may be obtained by contacting Pan Pacific I. R. Limited, Nam Tai's investor relations firm, or from Nam Tai's website at http://www.namtai.com.
All information in this press release is as of February 11, 2007. Nam Tai undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Nam Tai's expectations.
ABOUT NAM TAI ELECTRONICS, INC.
We are an electronics manufacturing and design services provider to a select group of the world's leading OEMs of telecommunications and consumer electronic products. Through our electronics manufacturing services operations, we manufacture electronic components and sub-assemblies, including LCD panels, LCD modules, RF modules, FPC sub-assemblies and image sensors modules. These components are used in numerous electronic products, including cellular phones, laptop computers, digital cameras, copiers, fax machines, electronic toys, handheld video game devices and microwave ovens. We also manufacture finished products, including personal digital assistants, electronic dictionaries, calculators, digital camera accessories and Bluetooth(TM) wireless headsets for use with cellular phones.
Nam Tai has two Hong Kong listed subsidiaries, Nam Tai Electronic & Electrical Products Limited ("NTEEP") and J.I.C. Technology Company Limited ("JIC"). Interested investors may visit the website of The Stock Exchange of Hong Kong at http://www.hkex.com.hk to obtain the information. The stock codes of NTEEP and JIC registered with The Stock Exchange of Hong Kong are 2633 and 987 respectively. Investors are reminded to exercise caution when assessing such information and not to deal the shares of the Company based solely on such information.
NON-GAAP INFORMATION
In addition to disclosing results determined in accordance with accounting principles generally accepted in the United States ("US GAAP"), management utilizes a measure of net income and earnings per share on a non-GAAP basis that excludes certain income/expenses to better assess operating performance. Those non-GAAP financial measures exclude certain items, such as share-based compensation expenses, losses arising from the judgment to reinstate the Redeemed Shares, restructuring costs, realized gain or loss on the disposal of marketable securities, investments or interests in subsidiaries, impairment loss on marketable securities or goodwill, or other infrequent or unusual items. 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 data prepared in accordance with US GAAP as measures of our profitability or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made. See the table in the press release on page 2 for a reconciliation of non-GAAP amounts to amounts reported under US GAAP.
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005
(In Thousands of US Dollars except share and per share data)
Unaudited Unaudited
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
Net sales - related
parties $ - $21 $ - $6,195
Net sales - third
parties 229,647 247,157 870,174 791,042
Total net sales 229,647 247,178 870,174 797,237
Cost of sales 207,637 221,835 783,953 704,314
Gross profit 22,010 25,343 86,221 92,923
Gain on disposal of
asset held for sale - - 9,258 -
Costs and expenses
Selling, general
and administrative
expenses 8,129 8,658 30,668 33,057
Research and
development expenses 2,020 2,153 7,866 7,210
Losses arising from
the judgment to
reinstate redeemed
shares 14,465 - 14,465 -
24,614 10,811 52,999 40,267
Operating (Loss)
Income (2,604) 14,532 42,480 52,656
Other (expenses)
income, net (504) 517 (1,265) 454
Gain on sales of
subsidiaries' shares - - - 10,095
Gain on disposal of
an affiliated company - - - 3,631
Impairment loss on
marketable securities - - - (6,525)
Loss on disposal of
marketable securities - (2,265) - (3,686)
Loss on marketable
securities arising
from split share
structure reform - - (1,869) -
Interest income 2,396 1,474 8,542 3,948
Interest expense (146) (136) (602) (438)
(Loss) Income before
income taxes and
minority interests (858) 14,122 47,286 60,135
Income taxes (70) (140) (377) (651)
(Loss) Income before
minority interests and
equity in loss of an
affiliated company (928) 13,982 46,909 59,484
Minority interests (1,396) (1,282) (6,153) (7,992)
(Loss) Income after
minority interests (2,324) 12,700 40,756 51,492
Equity in loss of an
affiliated company - - - (186)
Net (loss) income $(2,324) $12,700 $40,756 $51,306
(Loss) Earnings per share
Basic $(0.05) $0.29 $0.93 $1.19
Diluted (0.05) $0.29 $0.93 $1.19
Weighted average number of shares ('000')
Basic 43,787 43,376 43,702 42,945
Diluted 44,251 43,532 43,858 43,169
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31, 2006 AND DECEMBER 31, 2005
(In Thousands of US Dollars)
Unaudited Audited
December 31 December 31
2006 2005
ASSETS (note)
Current assets:
Cash and cash equivalents $221,084 $213,843
Marketable securities 24,360 13,330
Accounts receivable, net 117,561 125,662
Inventories 30,894 31,744
Prepaid expenses and other receivables 2,503 1,490
Income taxes recoverable 4,316 2,671
Assets held for sale - 10,912
Total current assets 400,718 399,652
Property, plant and equipment, net 102,721 97,997
Land use right 2,673 2,744
Deposits for property, plant and equipment 609 1,250
Deposit for land used right 2,880 -
Goodwill 18,476 17,068
Other assets 1,158 1,300
Total assets $529,235 $520,011
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $4,516 $4,813
Short-term bank loans - 2,275
Long-term bank loans - current portion 1,750 2,312
Accounts payable 125,893 121,608
Accrued expenses and other payables 13,649 19,447
Dividend payable 16,639 14,357
Income taxes payable 166 166
Total current liabilities 162,613 164,978
Long-term bank loans - non-current portion 1,100 2,850
Total liabilities 163,713 167,828
Minority interests 48,428 41,792
Shareholders' equity:
Common shares 438 435
Common shares to be issued 17,159 -
Additional paid-in capital 264,393 258,167
Retained earnings 25,030 50,771
Accumulated other comprehensive income
(Note 1) 10,074 1,018
Total shareholders' equity 317,094 310,391
Total liabilities and shareholders'
equity $529,235 $520,011
Note: Information extracted from the audited financial statements included
in the 2005 Form 20-F of the Company filed on March 15, 2006.
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005
(In Thousands of US Dollars)
Unaudited Unaudited
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(2,324) $12,700 $40,756 $51,306
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization of
property, plant and
equipment 4,833 4,341 19,024 16,824
Amortization of
intangible assets - - - 459
Net (gain) loss on
disposal of property,
plant and equipment (127) 87 (317) (563)
Net gain on disposal
of assets held for sale - - (9,258) -
Loss on marketable
securities arising
from split share
structure reform - - 1,869 -
Losses arising from the
judgment to reinstate
redeemed shares 14,465 - 14,465 -
Gain on partial
disposal of
subsidiaries - - - (10,095)
Gain on disposal of
investment in an
affiliated company - - - (3,631)
Impairment loss on
marketable securities - - - 6,525
Share-based compensation
expenses 103 - 873 -
Loss on disposal of
marketable securities - 2,265 - 3,686
Equity in loss of an
affiliated company - - - 186
Minority interests 1,396 1,282 6,153 7,992
Changes in current assets and liabilities:
Decrease (increase) in
accounts receivable 10,615 (5,978) 8,101 (35,300)
Decrease in amount due
from a related party - - - 66
Decrease (increase) in
inventories 1,335 3,292 850 (8,648)
Decrease (increase) in
prepaid expenses and
other receivables 1,173 129 (1,013) 377
(Increase) decrease in
income taxes
recoverable (118) 6,270 (1,645) 3,895
(Decrease) increase in
notes payable (1,060) 1,120 (297) 2,733
(Decrease) increase in
accounts payable (11,769) 15,059 4,285 32,038
Increase (decrease) in
accrued expenses and
other payables 1,412 (74) (3,104) 2,786
Decrease in income
taxes payable - (40) - (17)
Others (117) (81) (931) 206
Total adjustments 22,141 27,672 39,055 19,519
Net cash provided by
operating activities $19,817 $40,372 $79,811 $70,825
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property,
plant and equipment (12,684) (8,659) (23,793) (32,166)
Decrease (increase) in
deposit for purchase
of property, plant
& equipment 9,136 (107) 641 6,451
Increase in deposit
for purchase of land (2,880) - (2,880) -
(Increase) decrease in
other assets (24) (40) 142 (40)
Proceeds from disposal
of property, plant and
equipment 134 8 420 1,788
Proceeds from disposal
of marketable securities - 3,416 - 10,995
Proceeds from disposal
of assets held for sale - - 20,170 -
Proceeds from disposal
of investment in an
affiliated company - - - 6,494
Acquisition of additional
shares in subsidiaries - - (3,130) -
Proceeds from partial
disposal of
subsidiaries - - - 25,218
Net cash (used in)
provided by investing
activities $(6,318) $(5,382) $(8,430) $18,740
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid $(16,638) $(14,297) $(65,923) $(51,984)
Repayment of bank loans (2,910) (3,118) (8,067) (5,375)
Proceeds from bank loans - 2,274 3,480 4,774
Proceeds from shares
issued on exercise of
options - 3,492 5,439 16,420
Net cash used in
financing activities $(19,548) $(11,649) $(65,071) $(36,165)
Net (decrease) increase
in cash and cash
equivalents (6,049) 23,341 6,310 53,400
Cash and cash
equivalents at
beginning of period 227,016 190,421 213,843 160,649
Effect of exchange
rate changes on
cash and cash
equivalents 117 81 931 (206)
Cash and cash
equivalents at end
of period $221,084 $213,843 $221,084 $213,843
NAM TAI ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
FOR THE PERIODS ENDED DECEMBER 31, 2005 AND 2006
(In Thousands of US Dollars)
1. Accumulated other comprehensive income represents foreign currency
translation adjustments and unrealized gain (loss) on marketable
securities. The comprehensive income of the Company was $49,812 and
$45,777 for the year ended December 31, 2006 and December 31, 2005,
respectively.
2. Business segment information - The Company operates primarily in three
segments, the Consumer Electronics and Communication Products ("CECP")
segment, Telecommunication Components Assembly ("TCA") segment, and the
LCD Products ("LCDP") segment.
Unaudited Unaudited
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
NET SALES:
- CECP $48,898 $40,731 $178,320 $169,056
- TCA 164,275 192,497 627,199 570,069
- LCDP 16,474 13,950 64,655 58,112
Total net sales $229,647 $247,178 $870,174 $797,237
NET (LOSS) INCOME:
- CECP $3,331 $2,455 $12,254 $16,830
- TCA 9,040 10,871 31,424 35,216
- LCDP - 428 2,575 3,224
- Corporate (14,695) (1,054) (5,497) (3,964)
Total net (loss)
income $(2,324) $12,700 $40,756 $51,306
Unaudited Audited
Dec. 31, Dec. 31,
2006 2005
IDENTIFIABLE ASSETS BY SEGMENT:
- CECP $181,634 $148,173
- TCA 170,129 170,624
- LCDP 58,172 57,736
- Corporate 119,300 143,478
Total assets $529,235 $520,011
A summary of the net sales, net income and long-lived assets by geographic areas is as follows:
Unaudited Unaudited
Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
NET SALES FROM OPERATIONS
WITHIN:
- Hong Kong and Macao:
Unaffiliated
customers $ - $13,950 $ - $58,112
Intercompany sales - 148 - 670
- PRC, excluding
Hong Kong and Macao:
Unaffiliated
customers 229,647 233,207
870,174 732,930
Related party - 21 - 6,195
Intercompany
sales 70 - 418 -
- Intercompany
eliminations (70) (148) (418) (670)
Total net sales $229,647 $247,178 $870,174 $797,237
NET (LOSS) INCOME
FROM OPERATIONS WITHIN:
- PRC, excluding
Hong Kong and
Macao $6,180 $7,541 $18,743 $31,354
- Macao (7,777) 10,623 16,833 32,285
- Hong Kong (727) (5,464) 5,180 (12,333)
Total net (loss)
income $(2,324) $12,700 $40,756 $51,306
Unaudited Audited
Dec. 31, Dec. 31,
2006 2005
LONG-LIVED ASSETS WITHIN:
- PRC, excluding Hong Kong and Macao
$105,123 $100,372
- Macao 39 88
- Hong Kong 232 281
Total long-lived assets $105,394 $100,741
Source: prnewswire
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