Nam Tai Electronics, Inc. - Q4 2009 Sales Down 44.5%, Gross Profit Margin At 10.8%; 2009 Sales Down 34.5%, Gross Profit Margin At 9.9%

SHENZHEN, China, Feb. 8 /PRNewswire-FirstCall/ -- Nam Tai Electronics, Inc. (" Nam Tai" or the "Company") (NYSE: NTE) today announced its unaudited results for the fourth quarter and year ended December 31, 2009.

    
    
    KEY HIGHLIGHTS
    (In thousands of US Dollars, except per share data, percentages and 
     as otherwise stated)
    
                              Quarterly Results            Year Results
                         -------------------------  --------------------------
                         Q4 2009   Q4 2008  YoY(%)  12M 2009  12M 2008  YoY(%)
                         -------   -------  ------  --------  --------  ------
    
     Net sales           $93,735  $169,021  (44.5)  $408,137  $622,852  (34.5)
     
     Gross profit        $10,162   $14,648  (30.6)   $40,320   $70,678  (43.0)
            % of sales      10.8%      8.7%     -        9.9%     11.3%     -
             
     Operating income
      (loss)                $692  $(14,455)     *       $388    $6,386  (93.9)
            % of sales       0.7%     (8.6%)    -        0.1%      1.0%     -
            per share
             (diluted)     $0.02    $(0.32)     *      $0.01     $0.14  (92.9)
          
     Net income (loss)
      attributable to
      Nam Tai
      shareholders(a)       $416  $(14,447)     *     $1,652   $30,635  (94.6)
            % of sales       0.4%     (8.5%)    -        0.4%      4.9%     -
     
     Basic earnings
      (loss) per share     $0.01    $(0.32)     *      $0.04     $0.68  (94.1)
     
     Diluted earnings
      (loss) per share     $0.01    $(0.32)     *      $0.04     $0.68  (94.1)
     
     Weighted average
      number of shares
      ('000)
       
       Basic              44,804    44,804      -     44,804    44,804      -
       
       Diluted            44,820    44,804      -     44,810    44,806      -
       
    
    Note:
     (a) For the twelve months ended December 31, 2008, net income included
         $20.2 million of gain on disposal of J.I.C. Technology Company 
         Limited ("JIC").
     * Percentage change is not presented if either the latest period or 
       prior period contains a loss.
    

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 / (loss), net income / (loss) and earnings (loss) 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 sale of shares of a subsidiary, employee severance benefits in PRC subsidiaries and other income recovered from Tele-Art Inc. (in liquidation). 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/(loss) 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
                                               December 31,
                               ---------------------------------------------
                                        2009                   2008
                               ---------------------  ----------------------
                                          per share                per share
                               millions   (diluted)    millions    (diluted)
                               --------   ----------   --------    ---------
    GAAP Operating Income
     (Loss)                        $0.7        $0.02     $(14.4)      $(0.32)
    ---------------------          ----        -----     ------       ------
    Add back:
    -- Share-based
       compensation expenses(a)       -            -          -            -
    -------------------------       ---          ---        ---          ---
    -- Professional expenses
       in relation to
       privatization of NTEEP         -            -          -            -
    -----------------------         ---          ---        ---          ---
    -- Employee severance
       benefits in PRC
       subsidiaries (b)               -            -        0.6         0.01
    ------------------------        ---          ---        ---         ----
    -- Impairment loss on
       goodwill                       -            -       17.3         0.39
    --------------------            ---          ---       ----         ----
    Non-GAAP Operating Income      $0.7        $0.02       $3.5        $0.08
    -------------------------      ====        =====       ====        =====
    GAAP Net Income (Loss)
     attributable to Nam Tai
     shareholders                  $0.4        $0.01     $(14.4)      $(0.32)
    ------------------------       ----        -----     ------       ------
    Add back/(Less):
    -- Share-based
       compensation expenses(a)       -            -          -            -
    -------------------------       ---          ---        ---          ---
    -- Professional expenses
       in relation to
       privatization of NTEEP         -            -          -            -
    -----------------------         ---          ---        ---          ---
    -- Employee severance
       benefits in PRC
       subsidiaries (after
       deducting tax and sharing 
       with noncontrolling 
       interest)(b)                   -            -        0.6         0.01
    -------------------------       ---          ---        ---         ----
    -- Impairment loss on
       goodwill                       -            -       17.3         0.39
    --------------------            ---          ---       ----         ----
    -- Gain on sale of
       subsidiary shares(c)           -            -          -            -
    ----------------------          ---          ---        ---          ---
    -- Other income
       recovered from Tele-Art
       Inc. (in liquidation)(d)       -            -          -            -
    -------------------------       ---          ---        ---          ---
    Non-GAAP Net Income
     attributable to Nam Tai
     shareholders                  $0.4        $0.01       $3.5        $0.08
    ------------------------       ====        =====       ====        =====
                                                              
    Weighted average number
     of shares – diluted
     ('000)                      44,820                  44,804
    -----------------------      ------                  ------
    
    
    
                                                Year ended
                                               December 31,
                               ---------------------------------------------
                                        2009                   2008
                               ---------------------  ----------------------
                                          per share                per share
                               millions   (diluted)    millions    (diluted)
                               --------   ----------   --------    ---------
    GAAP Operating Income
     (Loss)                        $0.4        $0.01       $6.4        $0.14
    ---------------------          ----        -----       ----        -----
    Add back:
    -- Share-based
       compensation expenses(a)     0.1            -        1.2         0.03
    -------------------------       ---          ---        ---         ----
    -- Professional expenses
       in relation to
       privatization of NTEEP       0.9         0.02          -            -
    -----------------------         ---         ----        ---          ---
    -- Employee severance
       benefits in PRC
       subsidiaries (b)             5.1         0.11        0.6         0.01
    ------------------------        ---         ----        ---         ----
    -- Impairment loss on
       goodwill                       -            -       17.3         0.39
    --------------------            ---          ---       ----         ----
    Non-GAAP Operating Income      $6.5        $0.14      $25.5        $0.57
    -------------------------      ====        =====      =====        =====
    GAAP Net Income (Loss)
     attributable to Nam Tai
     shareholders                  $1.7        $0.04      $30.6        $0.68
    ------------------------       ----        -----      -----        -----
    Add back/(Less):
    -- Share-based
       compensation expenses(a)     0.1            -        1.2         0.03
    -------------------------       ---          ---        ---         ----
    -- Professional expenses
       in relation to
       privatization of NTEEP       0.9         0.02          -            -
    -----------------------         ---         ----        ---          ---
    -- Employee severance
       benefits in PRC
       subsidiaries (after
       deducting tax and sharing 
       with noncontrolling 
       interest)(b)                 3.2         0.07        0.6         0.01
    -------------------------       ---         ----        ---         ----
    -- Impairment loss on
       goodwill                       -            -       17.3         0.39
    --------------------            ---          ---       ----         ----
    -- Gain on sale of
       subsidiary shares(c)           -            -      (20.2)       (0.45)
    ----------------------          ---          ---      -----        -----
    -- Other income
       recovered from Tele-Art
       Inc. (in liquidation)(d)       -            -       (2.9)       (0.07)
    -------------------------       ---          ---       ----        -----
    Non-GAAP Net Income
     attributable to Nam Tai
     shareholders                  $5.9        $0.13      $26.6        $0.59
    ------------------------       ====        =====      =====        =====
                                                              
    Weighted average number
     of shares – diluted
     ('000)                      44,810                  44,806
    -----------------------      ------                  ------
    
    
    Note: 
     (a) The share-based compensation expenses included approximately 
         $0.1 million attributable to  options to purchase 75,000 shares
         granted in the second quarter of 2009 ($0.2 million for year 2008 
         to directors in accordance with the Company's practice of making
         annual option grants to its 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 former 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. In December
         2008, NTEEP repurchased and cancelled all of its outstanding 
         17,440,000 options from the option holders at a total consideration
         of approximately $42,000. Accordingly, Nam Tai recorded no share-
         based compensation expense (relating to NTEEP) during the three
         months ended December 31, 2009.
     (b) The expense represents employee benefit and severance arrangements 
         in accordance with the PRC statutory severance requirements. 
     (c) On March 4, 2008, Nam Tai completed the sale of its entire equity
         interest of Namtek business in 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. 
     (d) 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.
    
    
    
    SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FOURTH QUARTER OF 2009
    
    1. Quarterly Sales Breakdown
       (In thousands of US Dollars, except percentage information)
    
                                                                YoY(%)
                                                  YoY(%)      (Quarterly
    Quarter                2009      2008      (Quarterly)    accumulated)
    -------                ----      ----      -----------   -------------
    
    1st Quarter           102,150   147,129      (30.6)         (30.6)
    2nd Quarter           101,836   146,168      (30.3)         (30.5)
    3rd Quarter           110,416   160,534      (31.2)         (30.7)
    4th Quarter            93,735   169,021      (44.5)         (34.5)
    Total                 408,137   622,852
    
    
    
    2. Breakdown of Net Sales by Product Segment (as a percentage of
       Total Net Sales)
    
                                      2009               2008
                                 ---------------    ---------------
    Segments                     Q4(%)    YTD(%)    Q4(%)    YTD(%)
    --------                     -----    ------    -----    ------  
    Consumer Electronic and
     Communication Products 
     ("CECP")                       27        28       37        44
    Telecommunication
     Component Assembly ("TCA")     54        55       54        44
    Liquid Crystal Display 
     Products ("LCDP")              19        17        9        12
                                   100       100      100       100
                                   
    
    
    3. Key Highlights of Financial Position
    
                                           As at December 31,
                                          2009             2008
                                          ----             ----
    Cash on hand (a)                 $195.6 million   $237.0 million
    Ratio of cash (a) to
     current liabilities                  2.56             1.66
    Current ratio                         3.59             2.67
    Ratio of total assets to total
     liabilities                          5.21             3.58
    Return on Nam Tai shareholders'
     equity                                0.5%             9.4%
    Ratio of total liabilities to
     total equity((b))                    0.24             0.39
    Debtors turnover                     52 days          61 days
    Inventory turnover                   16 days          18 days
    Average payable period               59 days          65 days
    
    Note:  
     (a) Includes cash equivalents.
     (b) Ratio for 2008 has been restated in order to conform this 
         year's basis of calculation.
    

OPERATIONS REVIEW

The business environment in Nam Tai's product sectors remains difficult and extremely competitive. Sales in the fourth quarter of 2009 were $93.7 million, a decrease of 44.5% as compared to sales of $169.0 million in the same quarter of 2008. Sales in our CECP segment and TCA segment dropped by 59.3% and 45.0% respectively and LCDP segment increased by 17.9%, during the fourth quarter of 2009, as compared to same period in 2008. Sales in our CECP segment declined significantly mainly because of the continuing effect from the global economic downturn. The weak demand in the market for our consumer products adversely affected sales of all of our end-user products such as mobile phone accessories, which principally represented sales of our headsets containing Bluetooth®(1) wireless technology, educational products, optical products and home entertainment devices. Sales in our TCA segment also declined as a consequence of the decline in sales of TCA.

The Company's gross profit margin in the fourth quarter of 2009 was 10.8% as compared to 8.7% in the fourth quarter of 2008. Gross profit in the fourth quarter of 2009 was $10.2 million, a decrease of 30.6%, as compared to $14.6 million in the fourth quarter of 2008, primarily resulting from the decrease in sales.

Net income attributable to Nam Tai shareholders in the fourth quarter of 2009 was $0.4 million, as compared to net loss of $14.5 million in same quarter of 2008, mainly due to impairment loss on goodwill $17.3 million in 2008. Basic and diluted earnings per share in the fourth quarter of 2009 were $0.01 per share, as compared to basic and diluted loss per share of $0.32 in the fourth quarter of 2008.

For the twelve months ended December 31, 2009, our net sales were $408.1 million, a decrease of 34.5% as compared to $622.9 million in the same period last year. The Company's gross profit margin was 9.9% as compared to 11.3% in the same period of 2008. Gross profit was $40.3 million, a decrease of 43.0%, as compared to $70.7 million in the same period last year. We reported an operating income for the twelve months of 2009 of $0.4 million, compared to operating income of $6.4 million in the same period last year. Our net income attributable to Nam Tai shareholders for the twelve months ended December 31, 2009 was $1.7 million, or $0.04 per share (diluted), as compared to net income attributable to Nam Tai shareholders of $30.6 million, or $0.68 per share (diluted), in the same period last year.

(1) The Bluetooth® word mark and logo are owned by the Bluetooth SIG, Inc. and any use of such mark by Nam Tai is under license.

Non-GAAP Financial Information

Non-GAAP operating income for the fourth quarter of 2009 was $0.7 million, or $0.02 per share (diluted), compared to non-GAAP operating income of $3.5 million, or $0.08 per share (diluted), in the fourth quarter of 2008. Non-GAAP net income attributable to Nam Tai shareholders for the fourth quarter of 2009 decreased to $0.4 million or $0.01 per share (diluted), compared to income of $3.5 million, or $0.08 per share (diluted), in the fourth quarter of 2008.

Liquidity and Financial Resources

Despite current economic conditions, Nam Tai's financial position as at December 31, 2009 remained strong with $195.6 million cash on hand. Net cash provided by operating activities in the fourth quarter was $15.6 million. During the fourth quarter, the Company made capital expenditure of $7.9 million.

Nam Tai's cash on hand has been invested in term deposits with HSBC and China Construction Bank. The Company continues to exercise rigorous corporate governance and control policies and is not involved in trading of any debt securities or financial derivative products.

EXPANSION PROJECTS

During the fourth quarter of 2009, we expended approximately $8 million mainly on our ongoing expansion project of FPC manufacturing plant in Wuxi near the east coast of China, approximately 80 miles northwest of Shanghai.  Upon the completion of construction of the plant in the second quarter 2009, manufacturing equipments and human resources were being established.  In the fourth quarter of 2009, the plant spent time and effort to build samples for customers in applications of automotive and telecommunications.  Small volume of mass manufacturing is expected to be scheduled in the first quarter of 2010. Continuously, there will be more samples to be built for more customers and higher volume of mass manufacturing will be commencing in the coming quarters.

PRIVATIZATION OF NTEEP

The compulsory acquisition of Nam Tai Electronic & Electrical Products Limited ("NTEEP") by the Company was completed on November 12, 2009.  Withdrawal of listing of the shares of NTEEP on the Stock Exchange of Hong Kong also took place with effect from November 13, 2009.  As a result, NTEEP has become a wholly-owned subsidiary of the Company.

COMPANY OUTLOOK

The business in 2009 was not satisfactory. The global financial crisis which continues from 2009 will affect the businesses of the Company in 2010.  It is believed that the business of our CECP segment continue to drop in 2010.  The Company will establish careful negotiations with customers on business terms to reduce further risks.  Such uncertainty hinders the growth and so the business outlook for the Company in 2010 remains tough.