Nam Tai Electronics, Inc. Q3 Sales Up 59%, Operating Income Up 36%, EPS Up 35% to $0.35
VANCOUVER, British Columbia, Nov. 8 /PRNewswire/ -- Nam Tai Electronics, Inc. ("Nam Tai" or the "Company")
(Nasdaq: NTAI NTAIW) today announced results for the third quarter ended September 30, 1999. Net sales for the third
quarter of 1999 were $37.6 million, up 59% compared to $23.7 million for the third quarter of 1998. Operating income
increased to $2.5 million ($0.27 per share), up 36% compared to 1998 third quarter operating income of $1.8 million ($0.18
per share). Non-operating income was $0.9 million, up from $0.8 million in 1998. Net Income was $3.3 million, an increase of
28% over the $2.6 million in the third quarter of 1998. Basic and diluted earnings per share for the third quarter of 1999 were
up 35% to $0.35 versus $0.26 for the third quarter of 1998.
"I am pleased to see the continued strong rebound in sales and earnings, although it has not been as great as expected during
the introduction phase of new products and new technologies in our production," commented Mr. Murakami, Nam Tai's
Chairman. "At the same time, we continue to diversify our geographic markets, and have achieved a more balanced product
mix amongst calculators, subassemblies and components, personal organisers and linguistic products, and our new telecom
products."
Net sales for the nine months ended September 30, 1999 increased by 32% to $106.8 million from $80.8 million for the nine
months of 1998. Operating income for the nine months of 1999 increased by 16% to $8.8 million ($0.93 per share) from $7.6
million ($0.72 per share) for the prior year period. Non-operating income decreased by $1.4 million to $2.4 million ($0.25 per
share) from $3.8 million ($0.36 per share). As a result, net income for the nine month period was down 4% to $10.8 million
from $11.2 million for 1998. Basic earnings per share for the nine months of 1999 were $1.15 compared to $1.07 for the prior
year period. Diluted earnings per share for the nine months of 1999 were $1.14 compared to $1.07 for the prior year period.
The Company continues to maintain a strong financial position, ending the third quarter of 1999 with $7.85 of cash per share
and approximately $14.13 of net book value per share, based on 9,260,823 shares outstanding as at September 30, 1999.
The Company, as at September 30, 1999, had a cash to current liabilities ratio of 1.8:1, a current ratio of 2.7:1, a total assets
to total liabilities ratio of 4.2:1, no long term debt, and approximately $72.7 million of cash, $68.2 million of which is in short
term deposits in U.S. currency.
The Company's gross profit margin was 15.0% for the third quarter 1999 versus 23.3% in the prior year period. The 1999
third quarter margin of 15.0% is down from the 20.5% margin in the second quarter, and reflected the very intense market
competition leading to falling prices. Also a number of new products and new technologies in production were introduced in the
third quarter, which impacted gross margins.
The Company indicated that a combination of other factors lowered sales growth, increased inventory levels and eroded gross
profit margins:
First, a temporary production difficulty was encountered in Nam Tai's second production line of Chip on Glass (COG)
equipment. This was due to its very sophisticated specifications and narrower pitch standards than the first line. Higher than
normal defect rates were encountered in the initial production as a result of using this new, state-of-the-art prototype
machinery. As a result, operations did not proceed as smoothly as expected. The problem has been identified and substantially
corrected by the Company. Management expects that within November operations of the second COG line will significantly
improve. From this experience, the Company has gained expertise and will be in a better position when, in the future, it
introduces the third line of more advanced COG equipment able to handle more precise specifications. Problems will be solved
with less difficulty, resulting in a shorter lead time to normal production.
Second, there is currently an industry-wide shortage of components, especially from Japan, in the electronics industry. Nam Tai
is not totally immune from the impact. Thanks to strong relationships with component suppliers, the Company is able to
significantly reduce the impact. However, certain delays in production have still been inevitable and the inventory of other raw
materials also increased.
Third, the Company is closely monitoring its telecom business, which is still in the start-up phase. The sales forecast for
Telecom for 1999 is around US$10 million. Because of the financial difficulty of the major telecom customer, management has
adopted a very prudent control policy when shipments are made. If this customer cannot overcome their current financial
problems, the Company will work directly with the end buyers with this customer's support. For the year of 2000, the sales
forecast for the telecom business is US$30-40 million with minimal profits.
Mr. S.H. Shim and Mr. D.G. Hahn, formerly Managing Director and Executive Director respectively of Nam Tai Telecom
(Hong Kong) Company Limited ("NT Telecom"), resigned from their offices for personal reasons. Though no longer involved in
the day-to-day management of the telecom business, they will continue to act as independent advisers to support the growth of
Nam Tai's telecom business until March 31, 2000. The Company is thankful for their contributions establishing this new line of
business. Mr. Kim Jong Sun and Mr. Takehiko Kaminaga have been appointed as General Manager and Vice General
Manager respectively to manage the marketing and manufacturing functions. They have recently set up a research and
development branch of NT Telecom in Korea.
Fourth, the recent sudden weakening of US Dollar against Japanese Yen has increased costs for the Company because salary
payments to the Japanese management team and a portion of material purchases are denominated in Yen. These increased
costs when converted from Yen to US Dollars in the third quarter 1999 have been recorded as foreign exchange losses
whenever the actual conversion exchange rate on the settlement of account payables or notes payable ended up higher than
when previously booked. For machinery and equipment purchased in Yen, amounts are capitalized as fixed assets on the
balance sheet according to the actual conversion exchange rate.
The 59% sales growth in the third quarter over the prior year period combined with the above factors increased inventory
levels by 174% at the end of the third quarter of 1999 compared to the end of the third quarter of 1998. Operating margins
(6.6% vs. 7.8%) and net income margins (8.7% vs. 10.8%) both fell compared to the same period in 1998. Selling, general
and administrative expenses fell to $2.5 million (6.5% of sales) in the third quarter of 1999 from $3.4 million (14.4% of sales) in
the same quarter of 1998. The reduction arose mainly from the reversal of an over-provision of custom duty. Research and
development expense increased by $406,000 to $670,000 in the third quarter of 1999 compared to $264,000 in the prior year
period.
Sales by product line in the third quarter of 1999 versus 1998 were: Calculators (20% vs. 60%), Subassemblies and
Components (29% vs. 12%), Personal Organizers and Linguistic Products (26% vs. 14%) and Telecom Products (15% vs.
0%). Sales by region in the third quarter of 1999 versus 1998 were to North America (22% vs. 48%), Japan (14% vs. 27%),
Europe (24% vs. 18%), Hong Kong (35% vs. 5%) and others (5% vs. 2%).
Battery Pack Business
Following the recent conclusion of a Technical Collaboration Agreement with Toshiba Battery Co. Ltd., as announced in the
Company's November 1, 1999 news release, the Company is taking steps to obtain the approval and issuance of a business
license for China. Nam Tai is planning to invest $2-3 million in machinery and equipment. The investment will occur in stages
over four years, commencing in year 2000. At the same time, arrangements will also be made for engineers to undergo training
both in China and Japan to be supported and co-ordinated by Toshiba as contracted. The Company is targeting to start
production before the end of summer in 2000 and will require approximately 60 additional employees including engineers.
Production is expected to be in full swing by 2003 at which time approximately 200 employees will be needed.
The battery packs to be produced will be sold to other manufacturers to be used in portable information devices such as
notebook computers, cellular phones and PDA's, as well as audio-visual devices such as camcorders and miniature audio
appliances. The Company is in the process of obtaining approval from the Chinese government for domestic sales. Future sales
channels in China as well as overseas will be developed under co-ordination and consultation with the original license owner.
The Company is optimistic that there exists a growing demand for battery packs. Sales of US$4 million are forecasted for the
year 2000 following with a target growth to exceed US$30 million by the year 2003. The Company will initially target
computer and cellular phone manufacturers within China and thereafter expand beyond China. Nam Tai's target is to capture
10% to 18% of China's battery pack market share by quantity.
Dividends
On October 11, 1999, the Company paid a quarterly dividend of $0.08 per share to shareholders of record on September 30,
1999. The record date for the fourth quarter dividend of $0.08 per share is December 31, 1999 and the payment date is on or
before January 17, 2000.
Third Quarter Results Analyst Conference Call
The Company will hold an analyst-only conference call today, Monday, November 8, 1999, at 10:30 a.m. Eastern Time for
analysts to discuss the third quarter results with management. Shareholders, investors and other interested individuals are invited
to listen to the live conference call by dialing 612-332-0107 just prior to its start time of 10:30 a.m. Eastern Time on Monday,
November 8, 1999. Callers will be asked to register with the conference call operator.
Except for the historical information contained herein, matters discussed in this press release are forward-looking statements.
For example, the Company's expectations regarding future sales in the telecom business and the battery pack business are
forward looking statements the results of which are uncertain and dependant upon many factors including end-user demand,
competitive pressures, technological change, regulatory approval and changes in general economic conditions. Other factors
that might cause differences in this and other forward looking statements include, but are not 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 years 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. Nam Tai manufactures telecommunication products, palm-sized PC's, personal digital
assistants, linguistic products, calculators, smart card readers and various components including battery packs which are used in
cellular phones, laptop computers, electronic toys and household appliances. The Company utilises advanced production
technologies such as chip on board ("COB"), chip on glass ("COG"), surface mount technology ("SMT"), tape automated
bonding ("TAB") and outer lead bonding ("OLB") technologies and anistropic conductive film ("ACF") heat seal technology.
Further information is available from Nam Tai's web site at www.namtai.com.
NAM TAI ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
FOR THE PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands of U.S. Dollars except share data)
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
Net sales $37,560 $23,659 $106,771 $80,796
Cost of sales 31,943 18,146 86,561 61,227
Gross profit 5,617 5,513 20,210 19,569
Costs and expenses
Selling, general and
administrative
expenses 2,455 3,411 9,676 11,140
Research and
development expenses 670 264 1,738 838
3,125 3,675 11,414 11,978
Income from operations 2,492 1,838 8,796 7,591
Gain (loss) on
disposal of
property, plant
and equipment (20) (55) 274 775
Other income (loss)
- net 5 (144) (669) (275)
Interest income 904 963 2,491 3,312
Income before
income taxes 3,381 2,602 10,892 11,403
Income tax expense 99 37 379 171
3,282 2,565 10,513 11,232
Share of results of
associated company -- -- 260 --
Net income $3,282 $2,565 $10,773 $11,232
Net income per share
Basic $0.35 $0.26 $1.15 $1.07
Diluted $0.35 $0.26 $1.14 $1.07
Weighted average number
of shares ('000')
Basic 9,260 10,036 9,390 10,485
Diluted 9,403 10,043 9,444 10,499
NAM TAI ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(In Thousands of U.S. Dollars)
Unaudited Audited
September 30 December 31
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $72,718 $71,215
Accounts receivable, net 20,665 16,138
Inventories 10,757 4,355
Marketable investments 0 513
Prepaid expenses
and deposits 4,375 4,794
Total current assets 108,515 97,015
Investment in
unconsolidated subsidiary 0 1
Investment in
associated company 16,805 16,223
Property, plant and
equipment, at cost 62,737 48,117
Less: accumulated
depreciation and
amortisation (18,935) (15,672)
43,802 32,445
Other assets 1,402 1,544
Goodwill 799 0
Total assets $171,323 $147,228
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $6,853 $329
Accounts payable and
accrued expenses 32,440 18,377
Dividend payable 741 665
Income tax payable 376 105
Total current liabilities 40,410 19,476
Deferred tax liabilities 57 56
Shareholders' equity:
Common shares 93 98
Additional paid-in capital 80,416 80,044
Retained earnings 50,302 47,509
Accumulated other
comprehensive income (note 1) 45 45
Total shareholders'
equity 130,856 127,696
Total liabilities
and shareholders' equity $171,323 $147,228
NAM TAI ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands of U.S. Dollars)
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
CASH FLOWS FROM OPERATIONS
Net income $3,282 $2,565 $10,773 $11,232
Add/(deduct) adjustments
to net income:
Depreciation and
amortisation 1,296 1,157 3,831 3,216
Stock option
compensation expense 103 (75) 103 --
(Gain) loss on disposal
of fixed assets 20 55 (274) (775)
Equity in income of
affiliated company -- -- (260) --
Loss on disposal
of subsidiary -- -- 290 --
Write-off remaining
carrying value
of investment 1 1 -- --
(Gain) on disposal
of Deswell shares -- -- -- (1,299)
Increase in
deferred taxes -- -- 1 --
Changes in current
assets and liabilities:
Marketable securities 72 76 513 (598)
Accounts receivable 4,732 5,188 (4,504) 577
Inventories (3,265) 1,822 (6,402) 5,908
Prepayments
and deposits 2,603 (206) 594 (881)
Notes payable (764) (632) 6,524 (1,632)
Accounts payable 754 (3,472) 14,063 (3,147)
Income taxes payable 99 37 271 (30)
4,231 2,813 11,059 197
Net cash flows
from operations $8,933 $6,515 $25,524 $12,571
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds on
disposal of
Deswell Shares $-- $-- $-- $2,132
Proceeds on disposal
of land
in Hong Kong -- -- 318 817
Proceeds on disposal
of fixed assets 1 5 3 382
Additions to
fixed assets (9,974) (932) (15,180) (3,991)
Other assets (6) 8 68 (13)
Long-term investment (974) -- (974) --
Investment in
associated company -- 460 (322) (15,819)
Net cash flow
from investing $ (10,953) $(459) $(16,087) $(16,492)
CASH FLOWS FROM
FINANCING ACTIVITIES
Share buy-back $ -- $ (3,947) $ (4,211) $(20,635)
Additional shares issued 6 -- 6 --
Redemption of shares -- -- (1,550) --
Dividend paid (740) (759) (2,171) (1,466)
Net cash flow
from financing $(734) $(4,706) $(7,926) $(22,101)
Foreign currency
translation adjustments 1 25 (8) 33
Net change in cash
and cash equivalents (2,753) 1,375 1,503 (25,989)
Cash and cash
equivalents,
beginning of
period 75,471 75,047 71,215 102,411
Cash and cash
equivalents,
end of period $72,718 $76,422 $72,718 $76,422
NAM TAI ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
FOR THE PERIODS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands of U.S. Dollars)
1. Accumulated other comprehensive income represents foreign currency
translation adjustments. The comprehensive income of the company was
$10,773 and $11,258 for the nine months ended September 30, 1999 and
September 30, 1998, respectively.
2. Certain comparative items have been reclassified to agree to the
presentation in the 1998 audited financial statements.
3. Business segment information - The Company operates principally in only
one segment of the consumer electronic products industry. A summary of
the net sales, income (loss) from operations and identifiable assets by
geographic areas is as follows:
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
NET SALES FROM OPERATIONS WITHIN:
-- Hong Kong $36,851 $23,257 $104,758 $79,853
Unaffiliated customers
-- PRC, excluding Hong Kong:
Unaffiliated customers 709 402 2,013 943
Intersegment sales 34,167 21,681 97,196 74,815
-- Intersegment
eliminations (34,167) (21,681) (97,196) (74,815)
Total net sales $37,560 $23,659 $106,771 $80,796
INCOME (LOSS) FROM OPERATIONS WITHIN:
-- PRC, excluding
Hong Kong $1,640 $2,099 $6,387 $7,129
-- Hong Kong 862 643 4,842 3,177
-- North America 780 (177) (456) 926
Total net income $3,282 $2,565 $10,773 $11,232
As at As at
Sept. 30, Dec. 31,
1999 1998
IDENTIFIABLE ASSETS BY
GEOGRAPHIC AREA:
-- PRC, excluding Hong Kong $57,896 $42,690
-- Hong Kong 113,427 85,419
-- North America -- 19,119
Total Assets $171,323 $147,228
SOURCE: Nam Tai Electronics, Inc.
CONTACT: Wendy Wiseman, Investor Relations Associate of Nam Tai Electronics, 604-669-7800, or 604-732-4344, or fax,
604-669-7816, or investor@namtai.com
All Headlines
Additional Headlines
PRN
11/08 04:00
Nam Tai Electronics, Inc. Q3 Sales Up 59%, Operating Income Up 36%, EPS Up 35% to $0.35
PRN
11/02 08:32
Nam Tai Electronics, Inc. to Release 3rd Qtr. Results on November 8
PRN
11/01 12:57
Nam Tai Electronics, Inc. - Nam Tai Introduces Battery Pack Technology From Toshiba Battery (Japan)
PRN
10/18 12:29
Nam Tai Electronics, Inc. to Release 3rd Qtr. Results on November 8
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