Nam Tai Electronics, Inc. Announces First
Quarter 1999 Results Sales Flat, Operating
Income Decreases 24%, Net Income Decreases 53%
VANCOUVER, British Columbia, May 10 /PRNewswire/ -- Nam Tai Electronics, Inc. (''Nam Tai'' or the
''Company'') (Nasdaq: NTAI - news) today announced first quarter results for the period ended March 31, 1999. Net
sales for the first quarter of 1999 were $27.1 million, an increase of 3% compared to sales of $26.3 million for the first
quarter 1998. Operating income decreased 24% to $2.5 million ($0.26 per share) compared to 1998 first quarter
operating income of $3.3 million ($0.30 per share). Non-operating income decreased by $2.2 million to $389,000
($0.04 per share) from $2.6 million ($0.23 per share). Net income decreased 53% to $2.8 million compared to $5.9
million in the first quarter of 1998. Basic and diluted earnings per share for the first quarter of 1999 were $0.29
compared to $0.53 for the first quarter of 1998.
''We previously indicated we expected a strong rebound in sales and profits in 1999,'' commented Nam Tai's
Chairman, Mr. Murakami. ''The 3% increase in sales in the first quarter is the first step in our rebound. Even though
unit prices for products dropped significantly in the first quarter, we were still able to show small sales growth as a
result of big increases in quantities shipped and by obtaining greater market share.'' He added ''quantities of sales of
LCD modules (the key major functioning modular in assembling cell phones and telephones etc.) started to increase
considerably in the first quarter. Continued increases in component sales should significantly improve sales and profits
in the future.''
The first quarter 1999 gross profit margin was 22.0% compared to 25.1% in the first quarter 1998. The drop in gross
profit margin reflected the more competitive environment in 1999 with reductions in selling prices continuing. Selling,
general and administrative expenses were unchanged at $3.0 million or 11.1% of sales, compared to 11.4% of sales in
the first quarter 1998. As a result of the increase in the Company's Original Design Manufacturing (''ODM'')
capabilities, research and development expenditures increased by $198,000 to $479,000 in the first quarter 1999
compared to $281,000 in the prior year period.
''We are pleased with the 22% gross profit margin in the first quarter 1999 given the competitive market conditions.
This still exceeds our gross profit margin target of 20%,'' noted Mr. Murakami. ''By tightly controlling our selling,
general and administrative expenses we hope to maintain healthy operating profit margins.''
Non-operating income in the first quarter 1999 dropped by $2.2 million to $389,000 in the first quarter 1999. The
principal reasons for the decline were a drop in interest income of $464,000 as a result of lower cash balances and
declining interest rates, no gains on disposals of assets in the first quarter of 1999, and other expenses increased during
the quarter, including translation differences of $151,000 and donations of $129,000. The first quarter 1998
non-operating income included a gain of $966,000 from the sale of the Company's interest in Deswell Industries Inc.
The earnings per share calculations for the first quarter 1999 take into account the decrease in weighted average common
shares outstanding and common stock equivalents from 11,132,000 in the first quarter of 1998 to 9,681,000 in the first
quarter 1999. The reduction in shares outstanding resulted from the Company's share repurchase program which to date
has resulted in 1,831,200 shares of the Company being repurchased and cancelled at an average price per share of
$13.91.
The Company's financial position remains strong at March 31, 1999 with cash per share of $7.35 and book value per
share of $13.41, based upon 9,284,523 common shares outstanding as of March 31, 1999. The Company had a cash to
current liability ratio of 2.63:1, a current ratio of 3.88:1, a total assets to total liabilities ratio of 5.78:1 and no long-term
debt.
Calculator sales were 58% of sales in the first quarter of 1999 compared to 64% in the first quarter of 1998.
Subassemblies and components were 26% of sales in first quarter 1999 compared to 21% in the prior year period. The
sales of personal organizers and linguistic products formed 12% of sales in the first quarter of 1999 compared to 15% in
the first quarter of 1998. Sales by region in the first quarter of 1999 versus 1998 were to North America 46% versus
51%, Japan 9% versus 24%, Europe 12% versus 18%, Hong Kong 29% versus 2% and others 4% versus 5%.
Impact of Albatronics (Far East) Co. Ltd.
On December 2, 1998 the Company announced the completion of the acquisition of a majority interest in Albatronics
(Far East) Co. Ltd. (''Albatronics''). Under ordinary circumstances, Nam Tai, as the controlling shareholder, would
consolidate Albatronics' financial statements with Nam Tai's. Due to the continuing troubled financial condition of
Albatronics and the possibility Albatronics could be would up within a short period, Nam Tai is equity accounting for its
investment in Albatronics.
During the fourth quarter 1998, Nam Tai made a full provision against the remaining carrying value of Albatronics. As a
result, there is no further impact to Nam Tai in the first quarter 1999 resulting from Albatronics'.
Albatronics has still not been able to reach an agreement with its bankers and major creditor to restructure its debts and
may be liquidated within a very short period of time. As Nam Tai has not guaranteed any of Albatronics' debts and has
fully written off this investment in 1998, the liquidation of Albatronics would not have a material impact on Nam Tai.
Investment in Group Sense (International) Limited (''Group Sense'')
On May 27, 1998 Nam Tai announced that it acquired approximately 20% of the outstanding shares of Group Sense, a
Hong Kong publicly listed company (Hang Seng company #601), at $HK0.62 per share. Group Sense has not released
its operating results for the six months ended March 31, 1999, therefore such results are not incorporated into Nam
Tai's first quarter net income figure. Nam Tai is pleased to see that Group Sense's share price improved strongly in the
last month.
Dividends
On April 16, 1999 the Company paid a quarterly dividend of $0.08 per share to shareholders of record on March 31,
1999. The record date for the second quarter dividend of $0.08 per share is June 30, 1999 and the payment date is on or
before July 16, 1999.
Annual General Meeting
As previously announced, Nam Tai's Annual Meeting of Shareholders will be held at 11:30 a.m. on June 11, 1999 at
the Peninsula Hotel, 700 5th Avenue at 55th Street, New York, New York. The record date for the annual meeting is
April 26, 1999. Proxy forms and 1998 Annual Reports will be sent out to shareholders on May 11, 1999.
Except for the historical information contained herein, matters discussed in this press release are forward-looking
statements involving risks and uncertainties that could cause actual results to differ materially from those anticipated in
the forward-looking statements. For example, the Company's expectations regarding its gross profit margin target, the
strong rebound in sales and profits, increases in component sales and double digit sales growth are forward-looking
statements the results of which are uncertain and may fluctuate depending on many factors including changes in
customer orders, sales mix, competitive pressures, material costs, and currency exchange rates. Other factors that might
cause differences in this and other forward looking statements include, but are not necessarily limited to those discussed
in the Company's reports filed with the Securities and Exchange Commission from time to time, such as the factors set
forth in Item 1. ''Description of Business -- Risk Factors'' in the Company's Annual Report on Form 20-F for the year
ended December 31, 1998.
Nam Tai Electronics, Inc. is a consumer electronics design and manufacturing service provider to some of the world's
leading original equipment manufacturers. Products manufactured by Nam Tai include palm-sized PC's, personal
organisers, personal digital assistants, linguistic products, calculators, smart card readers and various components
which are used in telecommunication products, electronic toys, and household appliances. Further information is
available from Nam Tai's web site at www.namtai.com.
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