Conference call was defensive and depressing.
And this is too bad, because I think the people who actually run the company (not Koo) know what they are doing. Here's some of my notes:
Koo started by reading almost all the info that was contained in the press release. He then added some forward looking comments on the next several quarters. The 2nd and 3rd quarters will be tough, especially the 2nd Q, due to the current turmoil in Asia. But the company has strong financial position and good profit margin (so he implied that Nam Tai could weather this storm). The current turmoil is a good opportunity for company to take advantage of using cash to advance growth and acquisition plans. Later he reiterated that thing seemed to be going smoothly on the acquisition front, and they hoped to have something to announce by the end of July.
Later in the Q&A, he responded to one question, and indicated that the drop in revenues was due to a 15 to 20% drop in unit prices in the 1st Q. The 2nd Q will see another 15 to 20% drop in prices. The reduction in prices was due to a change in product mix (more calculators), weak Japanese yen compared to the USD, lower component prices, and efficiency improvements made by Nam Tai. Labor costs are increasing.
Before the Q&A, he took the initiative, and discussed his personal sale of NTAIF stock. The sale did occur on the open market, but was coordinated with the company purchase of the almost the same number of shares. This way the price of the stock wouldn't be negatively impacted. He heard the concerns by shareholders, and will listen and try to improve... He sold the shares to cover his margin debt. They have consulted with legal consultants and believe this sale was in conformance with an SEC rule (he mentioned the SEC rule number).
One of the questioners asked about this directly, and Koo answered pretty much the same way. The questioner was concerned about all the sales by Koo, followed by the rights offering at then below market prices, followed by share repurchases at prices higher than the effective sales price of the stock in the rights offering (adjusted for the warrant market price), coupled with Koo's sale of shares, one or two days after the worst Q the company has had in some time, and before release of the financial reports on that Q. Great question, Koo kind of ignored it, and said sales were to cover margin debt and for personal reasons, and all shareholders can sell their shares for personal reasons on the open market. (ugh!!!)
The same questioner asked about the $98M in cash on the balance sheet, and asked since this was of the Q end, and the repurchase has taken place since the end, of the quarter, what is the current cash position? Koo didn't answer this question; I think he forgot to respond because he was responding to the personal stock sales issue.
In response to another question, Koo said the full year should be in double digit range (questioner asked whether it would be double digits or 20%, and he said yes- interpretation is open). The fourth Q should be strong due to new product lines and new customers. The impact of lower prices will be mostly seen in the 1st and 2nd quarters.
In response to another question, AR grew a bit, because some large customers used to do business on a letter of credit basis, but now Nam Tai is extending the usual credit terms that normally apply to long term customers.
Well, that is the key points, I guess. These are my interpretations, and do not necessary reflect exactly what was said, so take it all with necessary caution and realize that this is simply my thoughts. I am disgusted at what I view IMO as illegal insider sales last August, followed by the rather strange rights offering, followed by the use of company funds to bail Koo out of his position, which I think is also illegal. It causes FUD, and depresses the price of the stock below what it would be, even given the current downturn the company is experiencing. My opinion.
Paul |
