Nam Tai Electronics, Inc. Announces Second Quarter Results; Sales Down 23.7%, EPS Decreases 72.4% Vs. 2nd Quarter 1997
Sales Down 23.7%, EPS Decreases 72.4% Vs. 2nd Quarter 1997
VANCOUVER, British Columbia, Aug. 6 /PRNewswire/ -- Nam Tai Electronics, Inc. ("Nam Tai" or the "Company") (Nasdaq-NM: NTAIF and NTAWF) today announced results for the second quarter ended June 30, 1998. Net sales for the second quarter of 1998 were $30.86 million, a decrease of 23.7% compared to sales of $40.44 million for the second quarter of 1997. Operating income decreased 51.6% to $3.88 million ($0.38 per share) compared to 1997 second quarter operating income of $8.01 million ($1.02 per share). Non-operating net expense increased by $934,000 to $1.01 million ($0.10 per share) from $0.07
million ($0.01 per share). Net income decreased 63.9% to $2.8 million
compared to $7.76 million in the second quarter of 1997. Basic earnings per share for the second quarter of 1998 were $0.27 compared to $0.98 for the second quarter of 1997.
When compared to the 1997 second quarter, the percentage decrease in basic earnings per share is proportionately greater than the percentage of net sales decline. The primary reasons are that gross profit margin decreased by 6.9%, and there has been a 31% increase in weighted average common shares outstanding.
Net sales for the six months ended June 30, 1998 decreased by 20.2% to
$57.14 million from $71.60 million for the first six months of 1997.
Operating income for the first six months of 1998 decreased by 38.1% to $7.20 million from $11.64 million for the prior year period. Net income for the period decreased by 35.0% to $8.67 million from $13.33 million for 1997. Basic earnings per share for the first six months of 1998 were $0.81 compared to $1.70 for the prior year period.
The Company continues to maintain a strong financial position, ending the second quarter of 1998 with $7.34 of cash per share and approximately $13.59 of net book value per share, based on 10,220,023 shares outstanding as at June 30, 1998. The Company, as at June 30, 1998, had a cash to current liabilities ratio of 3.8:1, a current ratio of 5.5:1, a total assets to total liabilities ratio of 8.1:1, no long term debt, and approximately $75 million of cash, $63 million of which is in short term deposits in U.S. currency in North America.
The Company's gross profit margin was 24.2% for the second quarter 1998 versus 31.1% in the prior year. "The 31.1% margin for the second quarter of 1997 was an exceptionally good quarter," noted Mr. Edward K.W. Chan, Chief Financial Officer. He added, "The 1998 second quarter margin of 24.2% is down slightly from the 25.1% margin in the first quarter as a result of continuing pricing pressures in the market."
The basic earnings per share calculations for the second quarter of 1998 take into account the significant increase in the weighted average common shares outstanding from 7,881,632 (diluted 7,995,694) in the second quarter of 1997 to 10,312,067 (diluted 10,332,366) in the second quarter of 1998.
Non-operating items include the write-off of $840,000 paid for a currency option contract. This option provides Nam Tai with the right to purchase US$30 million at a fixed rate of HK$7.8 for each U.S. dollar on December 29, 1998.
Calculator sales formed 70% of sales in the second quarter of 1998
compared to 57% in the second quarter of 1997. The sales of personal
organizers and linguistic products formed 12% of sales in the second quarter of 1998 compared to 25% in the second quarter of 1997. Sales by region in the second quarter of 1998 versus 1997 were to North America (53%) versus (60%), Japan (20%) versus (18%), Europe (22%) versus (13%), and others (5%) versus (9%).
The Asian economic turmoil has caused the Company to face a slow down in orders, and customer pressure for unit price reductions. On July 2, 1998, the Company announced that it was adjusting its forecast for the remaining quarters of 1998 and is anticipating a drop in sales of approximately 15% - 25% for the full year ending December 31, 1998.
Acquisition Update
The Company continues to actively pursue and evaluate acquisitions in the United States, China, Hong Kong and Japan. Our 20% investment in Group Sense (International) Limited, a Hong Kong publicly listed company, will result in cash inflow of approximately US$520,000 in August 1998 in the form of dividends from that investee.
Update of Stock Repurchase Program
On July 2, 1998, the Company increased the maximum number of common shares that may be repurchased under the repurchase program from 1,000,000 to 2,000,000 common shares. At that date the repurchase program was extended for an additional six months. As at July 31, 1998, the Company repurchased an aggregate of 1,121,900 common shares at an average price of $16.27, reducing the number of common shares outstanding to 10,098,123.
Dividends
On July 17, 1998, the Company paid a quarterly dividend of $0.07 per share to shareholders of record on June 30, 1998. Payment and record dates for the third 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 winding-up of Tele-Art Inc. ("Tele-Art") (Symbols: TLARF, TLAFE) because Tele-Art failed to repay a judgment debt and interest owing to Nam Tai of approximately $1,000,000. The High Court of Justice in the British Virgin Islands on July 17, 1998 ordered that Tele-Art be wound up by the Court and appointed a liquidator based in Hong Kong.
Reminder of Analyst Conference Call Time
The Company will hold an analysts-only conference call on Friday, August 7 at 12:00 noon Eastern Time for analysts to discuss the second quarter results with management.
Shareholders, investors and other interested individuals are invited to listen to the live conference call by dialing 1-416-620-1943 just prior to its start time of 12:00 noon Eastern Time. Callers will be asked to register with the conference call operator upon dialing in.
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