Nam Tai Electronics, Inc. Announces First Quarter Results; Net Income Up 5.3%, EPS Decreases 25.4% Vs. 1st Quarter 1997
PR Newswire - May 05, 1998 16:07
VANCOUVER, British Columbia, May 5 /PRNewswire/ -- Nam Tai Electronics, Inc. (Nasdaq-NNM: NTAIF and NTAWF) ("Nam Tai" or the "Company") today announced results for the first quarter ended March 31, 1998. Net sales for the first quarter of 1998 were $26.3 million, a decrease of 15.6% compared to sales of $31.2 million for the first quarter of 1997. Operating income decreased 8.5% to $3.32 million ($0.30 per share) compared to 1997 first quarter operating income of $3.63 million ($0.46 per share). Non-operating income increased by $0.60 million to $2.60 million ($0.23 per share) from $2.01 million ($0.25 per share). Net income increased 5.3% to $5.87 million
compared to $5.57 million in the first quarter of 1997. Basic and diluted earnings per share for the first quarter of 1998 were $0.53 compared to $0.71 for the first quarter of 1997.
The Company continues to maintain a strong financial position, ending the first quarter of 1998 with $8.93 of cash per share and approximately $13.62 of net book value per share, based on 10,972,975 shares outstanding as at March 31, 1998. The Company, as at March 31, 1998, had a cash to current liabilities ratio of 5.8:1, a current ratio of 7.9:1, a total assets to total liabilities ratio of 9.9:1, no long term debt, and over $98 million of cash, $79 million of which is in short term deposits in U.S. currency in North America.
The Company showed continuing strength in its operating performance with higher gross profit margin (25.1% vs. 23.3%) and operating income to sales (12.6% vs. 11.7%) in the first quarter of 1998 compared to the first quarter of 1997.
The earnings per share calculations for the first quarter of 1998 take into account the significant increase in the weighted average common shares outstanding from 7,898,900 in the first quarter of 1997 to 11,132,335 in the first quarter of 1998. The change resulted principally from the issuance of approximately 3,000,000 additional shares in the November 1997 Rights Offering.
The Company's first quarter 1998 non-operating income increased
$597,000 to $2.60 million from 2.01 million in the first quarter of 1997, including a gain on disposal of certain land and fixed assets in Hong Kong ($0.34 million), interest income of $1.27 million, and a gain of $0.97 million on the sale of 70,000 shares in Deswell Industries Inc. The remaining shares of Deswell Industries Inc. have been subsequently sold.
The Company's sales of higher margin electronic calculators increased to 64% of sales in the first quarter of 1998 from 51% in the first quarter of 1997. The sales of personal organizers and linguistic products formed 14% of sales in the first quarter of 1998 compared to 29% in the first quarter of 1997. Sales by region, to North America (51%), Japan (24%), Europe (18%), others (7%) stayed relatively constant in the first quarter of 1998 compared to the first quarter in 1997.
"Following the outbreak of the Asian economic turmoil which led to
devaluations in many Asian currencies, the Company has faced increased
competition and customer pressure for unit price reductions," commented Mr. Koo. "The decrease in sales resulted mainly from lower unit prices. Net income is up by $ 295,000, the improvement resulting from non-operating income increasing by $597,000. Most importantly, we are pleased that the Company continues to strengthen its operating performance by successfully sourcing materials at lower costs, negotiating lower component costs with suppliers, and improving operating efficiencies. As a result, the Company improved its gross profit margin. Management hopes to maintain this operating
improvement and to increase sales in the second quarter with increased orders and more diversification of sales by product lines. We are also aware that competition in the second and third quarters will be more severe especially after further reductions in unit prices."
Additions to Management
Concomitant with the search for a Chief Financial Officer with suitable qualifications and experience, the Company has decided to further strengthen the Finance Department and reorganize its structure. Besides a CFO, Nam Tai added the positions of Financial Controller, Treasurer and EDP Manager to support the CFO, together with the existing Internal Audit Manager, to manage the ongoing daily financial operations and to deal with forthcoming acquisitions. The filling of most of the above positions has now been basically accomplished, subject only to minor arrangements to be completed soon. Nam Tai plans to announce the new members for most of the above positions on Monday, May 25, 1998. "We hope, after the Company's diligent efforts in the search, all these new members of senior professional management are appropriate and can accommodate the Company's needs for further growth," commented Mr. M. K. Koo, Chairman of Nam Tai.
Acquisition Update
The Company has previously announced its intention to review acquisition prospects that would complement the Company's existing products and services, augment its market coverage and sales ability, or enhance its technological capabilities. The Company is in the process of evaluating various investments and acquisitions in the United States, China, Hong Kong and Japan and expects that with time and patience the process will yield results before the end of July 1998. Management is very confident that the current economic crisis in Southeast Asia presents an excellent opportunity for the Company to take advantage of its $98 million cash balance to make strategic acquisitions to support its continued growth.
Update of Stock Repurchase Program
On January 13, 1998 the Company announced its intention to repurchase up to 1,000,000 common shares over the next three months, from time to time, at prevailing market prices in accordance with SEC Rule 10b-18. The Company subsequently extended the program for a further three months to achieve the target of 1,000,000 common shares. As of March 31, 1998 the Company repurchased 251,118 common shares at an average price of $15.82 per share in the Nasdaq National Market. As of May 4, 1998 a total of 864,850 common shares were repurchased at an average price of $16.56.
Dividends
On April 28, 1998 the Company paid a quarterly dividend of $0.07 per share to shareholders of record on April 6, 1998. Payment and record dates for the second quarter dividend of $0.07 per share will be announced at a later date.
Litigation Update
On July 4, 1997, the Company announced that it filed a Petition for the wind-up of Tele-Art Inc. (Symbols: TLARF, TLAFE) because Tele-Art has been unable to repay a judgment debt and interest owing to Nam Tai of approximately $1,000,000. A hearing of the Petition is now scheduled in the High Court of Justice in the British Virgin Islands for May 28, 1998; however, Tele-Art has filed a Summons with the court, seeking to stay the wind-up Petition on the basis that the Company withheld Tele-Art's shares and is preventing them from being sold. Nam Tai will strongly contest such assertions.
Tele-Art is a British Virgin Island incorporated company with its
principal place of business in Hong Kong. Tele-Art Inc. is a shareholder of Nam Tai beneficially owning approximately 300,000 common shares. Tele-Art was listed on Nasdaq until November 1990 when it was delisted due to its failure to meet its disclosure requirements. Tele-Art and Nam Tai have another litigation matter which has been ongoing in the British Virgin Islands since 1993. The Company does not expect any of the litigation matters to have a material financial impact.
Annual General Meeting
As previously announced, Nam Tai's Annual Meeting of Shareholders will be held at 11:30 a.m. on June 8, 1998 at the Four Seasons Hotel, 57 East 57th Street, New York. The record date for the Annual Meeting is April 24, 1998. Proxy forms and annual reports will be sent out to shareholders on May 13, 1998.
Reminder of Analyst Conference call time
The Company will hold an analysts-only conference call on Wednesday, May 6 at 12:00 noon Eastern Time for analysts to discuss the first quarter results with management. Analysts who wish to participate in this conference call are invited to register with Ms. Wendy Wiseman, P.R. Secretary at 800-661-8831 extension 202.
Shareholders, Investors and other interested individuals are invited to listen to the live conference call by dialing 888-290-7011 just prior to its start time of 12:00 noon Eastern Time on Wednesday, May 6. Callers will be asked to register with the conference call operator upon dialing in.
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