Nam Tai Electronics, Inc. Q1 2010 Sales down 22.4%, Gross profit margin at 8.2%

SHENZHEN, PRC, May 3 /PRNewswire-FirstCall/ -- Nam Tai Electronics, Inc. ("Nam Tai" or the "Company") (NYSE: NTE) today announced its unaudited results for the first quarter ended March 31, 2010.

In addition to disclosing results determined in accordance with accounting principles generally accepted in the United States ("US GAAP") as set forth in the table above, management utilizes a measure of operating income / (loss), net income / (loss) and earnings (loss) per share on a non-GAAP basis that excludes certain income and expenses to better assess operating performance. Those non-GAAP financial measures exclude employee severance benefits in PRC subsidiaries. By disclosing the non-GAAP information, management intends to provide investors with additional information to analyze the Company's performance, core results and underlying trends. Non-GAAP information is not determined using US GAAP; therefore, the information is not necessarily comparable to other companies and should not be used to compare the Company's performance over different periods. Non-GAAP information should not be viewed as a substitute for, or superior to, net income/(loss) or other financial data prepared in accordance with US GAAP as measures of our operating results or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made. See the table below for a reconciliation of non-GAAP amounts to amounts reported under US GAAP.

OPERATIONS REVIEW

The business environment in Nam Tai's product sectors remains difficult and extremely competitive. Sales in the first quarter of 2010 were $79.3 million, a decrease of 22.4% as compared to sales of $102.2 million in the same quarter of 2009. Sales in our CECP segment and TCA segment dropped by 52.2% and 13.2% respectively and LCDP segment increased by 21.2%, during the first quarter of 2010, as compared to same period in 2009. Sales in our CECP segment declined significantly mainly because of the continuing effect from the global economic downturn. The weak demand in the market for our consumer products adversely affected sales of all of our end-user products such as mobile phone accessories, which principally represented sales of our headsets containing Bluetooth®(1) wireless technology, educational products, optical products and home entertainment devices. Sales in our TCA segment also declined as a consequence of the decline in sales of TCA.

The Company's gross profit margin in the first quarter of 2010 was 8.2% as compared to 7.0% in the first quarter of 2009. Gross profit in the first quarter of 2010 was $6.5 million, a decrease of 8.7%, as compared to $7.1 million in the first quarter of 2009, primarily resulting from the decrease in sales.

Net loss in the first quarter of 2010 was $1.1 million, as compared to net loss attributable to Nam Tai shareholders of $3.9 million in same quarter of 2009. The loss in the first quarter of 2010 primarily resulted from the overall decline in sales, whereas the loss in the first quarter of 2009, was attributable to a $5.1 million restructuring charge for employee severance expenses in Nam Tai's PRC subsidiaries. Basic and diluted loss per share in the first quarter of 2010 were $0.02, as compared to basic and diluted loss per share of $0.09 in the first quarter of 2009.

Non-GAAP Financial Information

Non-GAAP operating loss for the first quarter of 2010 was $0.6 million, or $0.01 per share (diluted), compared to non-GAAP operating loss of $1.4 millions, or $0.03 per share (diluted), in the first quarter of 2009. Non-GAAP net loss for the first quarter of 2010 increased to $1.1 million or $0.02 per share (diluted), compared to loss of $0.7 million, or $0.02 per share (diluted), in the first quarter of 2009.

Liquidity and Financial Resources

Despite current economic conditions, Nam Tai's financial position as at March 31, 2010 remained strong with $196.8 million cash on hand. Net cash provided by operating activities in the first quarter was $4.4 million. During the first quarter, the Company made capital expenditure of $3.3 million.

Nam Tai's cash on hand has been invested in term deposits with HSBC and China Construction Bank. The Company continues to exercise rigorous corporate governance and control policies and is not involved in trading of any debt securities or financial derivative products.

EXPANSION PROJECTS

The newly completed expansion project of FPC manufacturing plant in Wuxi near the east central coast of China, approximately 80 miles northwest of Shanghai started operation in January 2010.  The Company is also still waiting for the release of the land in Guangming by the Government.  This piece of land of about 118,000 square meters will be reserved for future expansion of business after 3 to 5 years.

COMPANY OUTLOOK

Although some believe that the global recession has reached bottom and economic conditions are improving, we believe that conditions prevailing at the end of 2009 will continue during 2010 and limit our business and growth. We expect demand for LCD panels and modules and flexible printed circuit, or FPC, boards and subassemblies to increase in 2010. However, we also anticipate that orders for optical and educational products in our CECP segment will remain weak and may even decrease from 2009 levels. Our business in the first quarter of 2010 support these predictions.  As a consequence, we now believe that our overall business in 2010 may grow, but only slightly from 2009 levels, provided that inflation in China, which we expect to increase in 2010, does not drive wages and manufacturing costs to a point where our gross margins further deteriorate materially from the depths reached in 2009.

In 2010, we plan to focus on developing and manufacturing FPC products.  Our new Wuxi facility began low-volume manufacturing of FPC products on schedule. We are using this production not only as a source for other products we manufacture in our LCDP segment but also for products we manufacture for automotive applications. We anticipate developing other product applications for our FPC products, such as backlights and digital cameras, and that these will contribute to revenues from our TCA segment in future periods.

We have completed the integration of our management of TCA and LCDP segments and plan to reduce our business in the CECP segment, eventually eliminating that low margin area of our business. Instead, we plan to concentrate our efforts toward restructuring our LCD module manufacturing, consolidating and integrating capacities and capabilities for these higher margin products in the belief that this segment offers the most compelling opportunity for our return to growth.

In the near-term we will direct our attention to improving management, and, where necessary, recruiting new executives to fill gaps we perceive in our hierarchy. We also plan to increase our sales and marketing personnel to stimulate efforts to attract new customers and expand our business with existing ones.  We have continued and will continue to exercise rigorous corporate governance and control policies and will maintain our utilization of an effective risk control system.

FORWARD-LOOKING STATEMENTS AND FACTORS THAT COULD CAUSE OUR SHARE PRICE TO DECLINE

Express or implied statements in this press release, such as the statements included in "Company Outlook," particularly management's expectations regarding increases in the demand for LCD modules and FPC products during 2010, growth in future quarters expected from the merger of management in Nam Tai's TCA and LCDP segments or the development of other product applications to be manufactured at Nam Tai's new Wuxi facility and management's assessment that Nam Tai will achieve limited growth during 2010 and statements regarding management's assessment of the strength of Nam Tai's financial condition and cash position, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in these forward-looking statements as a result of a number of factors, including continued deterioration of the market for the Company's customers' products and the global economy as a whole, which could negatively impact the Company's revenue and the ability of the Company's customers to pay for the Company's products; customer bankruptcy filings; the sufficiency of the Company's cash position and other sources of liquidity to operate and expand its business; competition negatively impacting the Company's revenues and margins; the need to adopt future restructuring plans as a result of prevailing business and economic conditions or changes in the Company's business; and one or more of the factors discussed in "Item 3. Key Information — Risk Factors" in the Company's s Annual Report on Form 20-F for the year ended December 31, 2009 as filed on March 16, 2010 with the Securities and Exchange Commission.

For further information regarding risks and uncertainties associated with Nam Tai's business, operating results or financial condition, please refer to the "Operating and Financial Review and Prospects," "Management's Discussion and Analysis of Results of Operations and Financial Condition" and "Risk Factors" sections of Nam Tai's SEC filings, including, but not limited to, its annual reports on Form 20-F and Reports on Form 6-K containing releases of Nam Tai's quarterly financial results, copies of which may be obtained from Nam Tai's website at http://www.namtai.com or from the SEC's EDGAR website at http://www.sec.gov.

All information in this press release is as of April 30, 2010 in Shenzhen of the People's Republic of China.  Nam Tai does not undertake any duty, and should not be expected, to update any forward-looking statement to conform the statement to actual results or changes in Nam Tai's expectations, unless so required by law.

(1) The Bluetooth® word mark and logo are owned by the Bluetooth SIG, Inc. and any use of such mark by Nam Tai is under license.

ABOUT NAM TAI ELECTRONICS, INC.

We are an electronics manufacturing and design services provider to a select group of the world's leading OEMs of telecommunications and consumer electronic products. Through our electronics manufacturing services operations, we manufacture electronic components and subassemblies, including LCD panels, LCD modules, RF modules, DAB modules, FPC subassemblies and image-sensor modules and PCBAs for headsets containing Bluetooth® wireless technology.  These components are used in numerous electronic products, including mobile phones, laptop computers, digital cameras, electronic toys, handheld video game devices, and entertainment devices. We also manufacture finished products, including mobile phone accessories, home entertainment products and educational products. We assist our OEM customers in the design and development of their products and furnish full turnkey manufacturing services that utilize advanced manufacturing processes and production technologies.

SOURCE Nam Tai Electronics, Inc.