[NAMTAI LOGO] FIRST QUARTER NEWS RELEASE
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REPRESENTED BY PAN PACIFIC I.R. LTD. CONTACT: Lorne Waldman
1790-999 WEST HASTINGS STREET President
VANCOUVER, BC, CANADA V6C 2W2 E-MAIL: shareholder@namtai.com
TEL: (604)669-7800 FAX: (604)669-7816 WEB: www.namtai.com
TOLL FREE TEL/FAX: 1-800-661-8831
NAM TAI ELECTRONICS, INC.
Q1 2006 Net Sales up 33%, Operating Income up 30%
VANCOUVER, CANADA -- May 15, 2006 -- Nam Tai Electronics, Inc. ("Nam Tai" or the
"Company") (NYSE Symbol: NTE) announced today its unaudited results for the
first quarter ended March 31, 2006.
KEY HIGHLIGHTS
(In thousands of US Dollars, except per share data and as otherwise stated)
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Quarterly Results (Unaudited)
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Q1/06 Q1/05 YoY(%)
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Net sales 208,358 156,923 32.8
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Gross Profit 21,114 18,417 14.6
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% of sales 10.1% 11.7% -
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Operating Income 12,604 9,679 30.2
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% of sales 6.0% 6.2% -
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per share (diluted) 0.29 0.23 26.1
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Net Income(a) 12,465 13,806 (9.7)
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% of sales 6.0% 8.8% -
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Basic earnings per share $0.29 $0.32 (9.4)
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Diluted earnings per share $0.29 $0.32 (9.4)
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Weighted average number of shares ('000')
Basic 43,538 42,675 -
Diluted 43,641 42,898 -
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Notes:
(a) With effect from January 1, 2006, the Company adopted the Statement of
Financial Accounting Standards No. 123 (Revised) - "Share-Based Payment"
issued by the Financial Accounting Standards Board. The Company has applied
the modified-prospective transition method in recording stock-based
compensation expenses in respect of stock options granted prior to, and any
remaining unvested options as of January 1, 2006 and stock options granted
on or after January 1, 2006. During the first quarter of 2006, the Company
recorded $79,000 in stock-based compensation expenses in respect of
non-vested pre-IPO stock options granted by its Hong Kong listed
subsidiary, Nam Tai Electronic & Electrical Products Limited ("NTEEP"), to
the employees of NTEEP upon NTEEP's listing in April 2004. GAAP to Non-GAAP
Reconciliation
Page 1 of 11
GAAP to Non-GAAP Reconciliation
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(In millions of US Dollars, except for earnings per share ("EPS"))
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Three months ended March 31,
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2006 2005
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million EPS $ million EPS $
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GAAP Net Income 12.4 0.29 13.8 0.32
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Add back/(Less): - - (5.9) (0.14)
- - realized gains on sale of a subsidiary's shares
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Non-GAAP Net Income 12.4 0.29 7.9 0.18
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Please see page 5 for a detailed discussion of management's use of non-GAAP
information.
Consistent with its strong performance in 2005, Nam Tai is pleased to announce
that it once again achieved outstanding results in the first quarter of 2006.
Net sales increased by 32.8% from $157 million in the first quarter of 2005 to
$208 million in the first quarter of 2006, which exceeded Nam Tai's first
quarter guidance for 2006. Capitalizing on the benefits from the restructuring
of its Hong Kong operations in 2005, the Company was successful in reducing its
selling, general and administrative expenses as well as research and development
expenses as a percentage of sales to 4.1% in the first quarter of 2006 as
compared to 5.6% in the same period last year. As a result, the Company's
diluted operating income per share increased by 26.1% from $0.23 in the first
quarter of 2005 to $0.29 in the first quarter of 2006, and surpassed its first
quarter guidance for 2006 by 26.1%. The GAAP diluted earnings per share
decreased by 9.4% from $0.32 in the first quarter of 2005 to $0.29 in the first
quarter of 2006 mainly due to a gain on sale of a subsidiary's share for $5.9
million in the first quarter of 2005. Most importantly, Nam Tai continued to
outperform its industry peers by achieving industry leading gross profit margins
of 10.1% and operating profit margins of 6.0% in the first quarter of 2006.
The non-GAAP diluted earnings per share increased by 61.1% to $0.29 in the first
quarter of 2006 as compared with $0.18 in the same period last year, and
surpassed its first quarter guidance for 2006 significantly by 31.8%. (Please
refer to the reconciliation of GAAP operating income to non-GAAP operating
income, and GAAP net income and earnings per share to non-GAAP net income and
earnings per share and non-GAAP information in page 5.)
Such strong results in the first quarter of 2006 was still attributable to the
Company's fast growing and high-tech key component subassemblies of
telecommunication products, which continued to outperform its other business
segments.
Nam Tai is very pleased to see that its business growth strategy of gaining
market share and achieving earnings growth has proven to be highly successful,
resulting in its financial performance repeatedly surpassing its expectation.
Company Outlook
With the sales of global high-tech telecommunication products rising
continuously, the Company believes the demand for high-tech key component
subassemblies will continue to be strong. As a result, the Company expects that
its key component subassemblies business will continue to be its major growth
driver. As the Company executes its expansion plans, which will enable it to
capture the continuous growth opportunities, the Company remains bullish on its
long term growth momentum.
Page 2 of 11
To strengthen its core key component subassemblies business, Nam Tai will
further expand its flexible printed circuit ("FPC") business by moving upstream
to commence FPC unit manufacturing. The Company believes that this strategic
move of enhancing the vertical integration of its FPC business will bring more
growth opportunities to the Company. The trial production of FPC unit
manufacturing is expected to commence at the end of the third quarter of 2006.
In addition to its investment in the vertical integration of its FPC business,
the Company has also made progress on its new factory expansion plan. The
Company has entered into an official agreement with the Guangming Hi-Tech
Industrial Park, Shenzhen, PRC, for the purchase of approximately 1.3 million
square feet of land. Completion of the land transfer is expected to occur in or
before the autumn of 2006.
With various development and expansion plans in place, Nam Tai remains positive
towards its future outlook, and believes that it is on track to create
substantial returns for its shareholders.
Going forward, driven by the number of new products in the pipeline, the Company
believes that its growth will continue in the second quarter of 2006 and extend
at a faster pace into the third and fourth quarters of 2006. Overall, the
Company's outlook for the full year of 2006 remains positive. Based on current
market conditions and its current order situation, the Company is pleased to
provide its projection for the second quarter of 2006 excluding approximately
$9.0 million realized gain on disposal of assets held for sale in April 2006 as
follows:
(In millions of US Dollars, except for per share data)
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2Q 2006 2Q 2005 1Q 2006
(Estimated) (Actual) (Actual)
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Sales $210-$220 $185 $208
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Non-GAAP Operating Income per Share (diluted) (a)(b) $0.28-$0.29 $0.33 $0.29
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Non-GAAP Earnings per Share (diluted) (a)(b)(c) $0.28-$0.30 $0.28 $0.29
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Notes:
(a) The non-GAAP operating income per share and non-GAAP earnings per share
estimate and comparative figures for prior periods may exclude certain
income and expenses for management to better assess operating performance
(see page 5 for non-GAAP information).
(b) The non-GAAP diluted operating income per share and non-GAAP diluted
earnings per share will be affected by any future changes in total number
of outstanding shares and stock options.
(c) The non-GAAP diluted earnings per share estimate is calculated based on a
current minority interest of approximately 30.5% in NTEEP and approximately
25.1% in J.I.C. Technology Company Limited. Minority interest may fluctuate
within and between quarters.
Mergent International Dividend Achievers(TM)
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Nam Tai has recently been selected as one of companies to be included on Mergent
International Dividend AchieversTM list. This year, only 15% of international
common stocks and ADRs traded on the major US exchanges met the stringent
inclusion criteria. The Company is pleased to be included in the Mergent
International Dividend AchieversTM list. Its 13th year record of increasing
dividends reflects both the Company's long term growth record and its continuing
commitment to its shareholders.
Sarbanes-Oxley Act
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The Company is working towards full compliance with the relevant sections of the
Sarbanes-Oxley Act in accordance with the timetable set out by the relevant
regulations.
Page 3 of 11
Supplementary Information (Unaudited) for the First Quarter of 2006
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1. Quarterly Sales Breakdown
(In thousands of US Dollars)
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Quarter 2006 2005 YoY(%) YoY(%)
(Quarterly) (Quarterly accumulated)
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1st Quarter 208,358 156,923 32.8 32.8
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2nd Quarter - 185,277 - -
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3rd Quarter - 207,859 - -
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4th Quarter - 247,178 - -
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Total 208,358 797,237
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2. Net Sales Breakdown by Product Segment
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2006 2005
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Segment 1Q (%) YTD (%) 1Q (%) YTD (%)
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Consumer Electronics and Communication Products:
- -Consumer Electronics and Communication Products 16% 16% 27% 27%
- -Software Development Services 1% 1% 1% 1%
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Telecom. Components Assembly 77% 77% 64% 64%
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Parts & Components: -LCD Panels 6% 6% 8% 8%
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100% 100% 100% 100%
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3. Key Highlight of Financial Position
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As at March 31, As at December 31,
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2006 2005 2005
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Cash on Hand $211.3 million $164.5 million $213.8 million
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Marketable Securities $13.3 million $40.3 million $13.3 million
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Cash/Current Liabilities 1.36 1.47 1.30
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Current Ratio 2.48 2.96 2.42
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Total Assets/Total Liabilities 3.23 3.95 3.10
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Return on Equity 16.1% 18.1% 16.7%
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Total Liabilities/Equity 0.51 0.38 0.54
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Debtors Turnover 51 days 56 days 58 days
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Inventory Turnover 13 days 14 days 16 days
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Average Payable Period 54 days 52 days 63 days
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With $17.4 million of net cash provided by operating activities in the first
quarter of 2006, the Company continues to maintain a strong financial position
even after the capital expenditures and payment of $14.4 million in dividends
for the fourth quarter of 2005 during the first quarter of 2006. Moreover, the
Company's other financial ratios remain healthy.
Page 4 of 11
First Quarter Results Analyst Conference Call
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The Company will hold a conference call on Monday, May 15, 2006 at 10:00 a.m.
EDT for analysts to discuss the first quarter results with management.
Shareholders, media, and interested investors are invited to listen to the live
conference over the internet by going to www.namtai.com and clicking on the
conference call link (under events) or over the phone by dialing (612) 288-0318
just prior to its start time.
Dividends
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The record date for the second quarter dividend of $0.38 per share is June 30,
2006 and the payment date will be on or before July 21, 2006.
Annual General Meeting
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The Company will hold its Annual Shareholders' Meeting at 11:30 a.m. (EDT) on
Friday, June 9, 2006 at The Peninsula New York, Tribeca Room, 3rd Floor, 700
Fifth Avenue at 55th Street, New York, NY. The record date for voting is April
21, 2006.
About Nam Tai Electronics, Inc.
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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 sub-assemblies, including LCD panels, LCD
modules, RF modules, DAB modules, FPC sub-assemblies, image sensors modules and
PCBA for BluetoothTM headsets. These components are used in numerous electronic
products, including cellular phones, laptop computers, digital cameras,
electronic toys, handheld video game devices, entertainment devices and
microwave ovens. We also manufacture finished products, including cellular
phones in semi-knocked down ("SKD"), form, mobile phone accessories and
educational products.
Nam Tai has two Hong Kong listed subsidiaries, Nam Tai Electronic & Electrical
Products Limited ("NTEEP") and J.I.C. Technology Company Limited ("JIC").
Interested investors may go to the website of The Stock Exchange of Hong Kong
Limited at www.hkex.com.hk to obtain the information. The stock code of NTEEP
and JIC on The Stock Exchange of Hong Kong Limited are 2633 and 987,
respectively. Investors are reminded to exercise caution when assessing such
information and not to deal with the shares of the Company based solely on
reliance of such information. The results of NTEEP and JIC only represent a part
of the results of the Company and there are GAAP differences in the financial
statements of NTEEP and JIC, when compared with the financial statements of the
Company. Furthermore, different subsidiaries of the Company may have a different
peak season during a year.
Non-GAAP Information
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In addition to disclosing results determined in accordance with accounting
principles generally accepted in the United States ("US GAAP"), management
utilizes a measure of net income and earnings per share on a non-GAAP basis that
excludes certain income/expenses to better assess operating performance. Those
non-GAAP financial measures excludes certain items, such as stock-based
compensation expenses, restructuring costs, realized gain or loss on the
disposal of marketable securities, investments
Page 5 of 11
or interests in subsidiaries, impairment loss on marketable securities or
goodwill, or other infrequent or unusual items. By disclosing this non-GAAP
information, management intends to provide investors with additional information
to further 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
or other data prepared in accordance with US GAAP as measures of our
profitability or liquidity. Users of this financial information should consider
the types of events and transactions for which adjustments have been made. See
the table in the press release on pages 1 and 2 for a reconciliation of non-GAAP
amounts to amounts reported under US GAAP.
Forward-Looking Statements
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Certain statements in this press release are "forward-looking statements" within
the meaning of U.S. federal securities laws. Nam Tai intends that these
statements be covered by the safe harbors created under these laws. These
forward-looking statements are, by their nature, subject to risks, uncertainties
and other factors that could cause the actual results to differ materially from
future results expressed or implied by the forward-looking statements. These
forward-looking statements include, without limitation, statements relating to
the Company's projected sales, projected gross profit margin, projected non-GAAP
operating income per share (diluted) and projected non-GAAP earnings per share
(diluted) for the second quarter of 2006, and plans relating to the expansion of
the Company's business. These forward-looking statements reflect our current
views with respect to future events and are not a guarantee of our future
performance. There are important factors that could cause the actual results to
differ materially from the information set forth in these forward-looking
statements. Given these uncertainties, readers are cautioned not to place undue
reliance on the forward-looking statements which only speak as of the date of
this press release. Because of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this news release might
not occur the way we expect, or at all. Nam Tai does not undertake any
obligation to release publicly any revisions to these forward-looking statements
to reflect events or circumstances after the date of this press release or to
reflect the occurrence of unanticipated events, except as may be required under
applicable securities laws. These factors include, without limitation, lower
than expected second quarter 2006 sales, unexpected changes to the Company's
cash position, general economic, market and business conditions and other
factors beyond the Company's control.
Page 6 of 11
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(In Thousands of US Dollars except share and per share data)
Unaudited
Three months ended
March 31
2006 2005
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Net sales - related parties $ - $ 5,105
Net sales - third parties 208,358 151,818
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Total net sales 208,358 156,923
Cost of sales 187,244 138,506
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Gross profit 21,114 18,417
Costs and expenses
Selling, general and administrative expenses 6,574 7,257
Research and development expenses 1,936 1,481
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8,510 8,738
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Operating income 12,604 9,679
Other expenses - net (207) (442)
Gain on sale of a subsidiary's shares - 5,870
Interest income 1,756 673
Interest expense (157) (82)
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Income before income taxes and minority interests 13,996 15,698
Income taxes (79) (141)
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Income before minority interests 13,917 15,557
Minority interests (1,452) (1,751)
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Net income $ 12,465 $ 13,806
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Earnings per share
Basic $ 0.29 $ 0.32
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Diluted $ 0.29 $ 0.32
Weighted average number of shares ('000')
Basic 43,538 42,675
Diluted 43,641 42,898
Page 7 of 11
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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AS AT MARCH 31, 2006 AND DECEMBER 31, 2005
(In Thousands of US Dollars)
Unaudited Audited
March 31 December 31
2006 2005
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ASSETS (note)
Current assets:
Cash and cash equivalents $ 211,273 $ 213,843
Marketable securities 13,330 13,330
Accounts receivable, net 115,556 125,662
Inventories 27,013 31,744
Prepaid expenses and other receivables 3,352 1,490
Income taxes recoverable 3,354 2,671
Assets held for sale 10,912 10,912
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Total current assets 384,790 399,652
Property, plant and equipment, net 96,323 97,926
Land use right 2,726 2,815
Deposits for property, plant and equipment 5,369 1,250
Goodwill 18,476 17,068
Other assets 1,134 1,300
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Total assets $ 508,818 $ 520,011
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,285 $ 4,813
Short-term bank loans 3,640 2,275
Long-term bank loans - current portion 2,031 2,312
Accounts payable 110,110 121,608
Accrued expenses and other payables 18,169 19,447
Dividend payable 16,580 14,357
Income taxes payable 166 166
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Total current liabilities 154,981 164,978
Long-term bank loans - non-current portion 2,413 2,850
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Total liabilities 157,394 167,828
Minority interests 42,556 41,792
Shareholders' equity:
Common shares 436 435
Additional paid-in capital 260,685 258,167
Retained earnings 46,656 50,771
Accumulated other comprehensive income (Note 1) 1,091 1,018
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Total shareholders' equity 308,868 310,391
Total liabilities and shareholders' equity $ 508,818 $ 520,011
===========================
Note: Information extracted from the audited financial statements included in
the 2005 Form 20-F of the Company filed on March 15, 2006.
Page 8 of 11
NAM TAI ELECTRONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(In Thousands of US Dollars)
Unaudited
Three months ended
March 31
2006 2005
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 12,465 $ 13,806
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of property, plant and equipment
and land use right 4,729 3,844
Amortization of intangible assets - 23
Net gain on disposal of property, plant and equipment (143) (29)
Stock option expenses 79 -
Gain on sale of a subsidiary's shares - (5,870)
Minority interests 1,452 1,751
Changes in current assets and liabilities :
Decrease (increase) in accounts receivable 10,106 (3,338)
Decrease in amount due from a related party - 66
Decrease in inventories 4,731 1,552
Increase in prepaid expenses and other receivables (1,862) (991)
Increase in income taxes recoverable (683) (558)
(Decrease) increase in notes payable (528) 1,078
Decrease in accounts payable (11,498) (14,268)
Decrease in accrued expenses and other payables (1,278) (1,988)
Increase in amount due to a related party - 1,116
Decrease in income taxes payable - (12)
Others (193) -
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Total adjustments 4,912 (17,624)
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Net cash provided by (used in) operating activities $ 17,377 $ (3,818)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment $ (2,969) $(11,328)
(Increase) decrease in deposits for property, plant and equipment (4,119) 3,044
Acquisition of additional shares in a subsidiary (2,120) -
Proceed from sale of a subsidiary's shares - 20,055
Decrease in other assets 166 -
Proceeds from disposal of property, plant and equipment 148 38
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Net cash (used in) provided by investing activities $ (8,894) $ 11,809
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CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid $ (14,357) $ (5,120)
Proceeds from bank loans 1,652 800
Repayment of bank loans (1,005) (719)
Proceeds from shares issued on exercise of options 2,464 945
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Net cash used in financing activities $ (11,246) $ (4,094)
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Net (decrease) increase in cash and cash equivalents (2,763) 3,897
Cash and cash equivalents at beginning of period 213,843 160,649
Effect of exchange rate changes on cash and cash equivalents 193 -
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Cash and cash equivalents at end of period $ 211,273 $164,546
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Page 9 of 11
NAM TAI ELECTRONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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FOR THE PERIODS ENDED MARCH 31, 2006 AND 2005
(In Thousands of US Dollars)
1. Accumulated other comprehensive income represents foreign currency
translation adjustments and unrealized gain (loss) on marketable
securities. The comprehensive income of the Company was $12,538 and $11,847
for the three months ended March 31, 2006 and March 31, 2005, respectively.
2. Business segment information - The Company operates primarily in three
segments, the Consumer Electronics and Communication Products ("CECP")
segment, Telecom. Components Assembly ("TCA") segment, and the LCD Panels
("LCDP") segment.
Unaudited
Three months ended
March 31
2006 2005
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NET SALES :
- CECP $ 35,170 $ 43,290
- TCA 160,570 101,360
- LCDP 12,618 12,273
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Total net sales $ 208,358 $156,923
======================
NET INCOME :
- CECP $ 2,831 $ 4,356
- TCA 8,902 4,565
- LCDP 543 609
- Corporate 189 4,276
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Total net income $ 12,465 $ 13,806
======================
Unaudited Audited
March 31, Dec. 31,
2006 2005
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IDENTIFIABLE ASSETS BY SEGMENT:
- CECP $ 48,142 $148,173
- TCA 58,933 170,624
- LCDP 8,844 57,736
- Corporate 42,899 143,478
----------------------
Total assets $ 508,818 $520,011
======================
Page 10 of 11
3. The following is a summary of the net sales, net income and long-lived
assets by geographical area. Geographical area is determined by the place
of delivery, as requested by the customer, and does not necessarily
represent the geographical location of our customers, or the ultimate
destination of products:
Unaudited
Three months ended
March 31
2006 2005
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NET SALES FROM OPERATIONS WITHIN:
-Hong Kong and Macao:
Unaffiliated customers $ - $ 12,273
Intercompany sales - 186
-PRC, excluding Hong Kong and Macao:
Unaffiliated customers 208,358 139,545
Related party - 5,105
Intercompany sales 159 -
-Intercompany eliminations (159) (186)
-----------------------
Total net sales $ 208,358 $ 156,923
=======================
NET INCOME WITHIN:
-PRC, excluding Hong Kong & Macao $ 4,461 $ 5,023
-Macao 9,943 5,514
-Hong Kong (1,939) 3,269
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Total net income $ 12,465 $ 13,806
======================
Unaudited Audited
March 31, Dec. 31,
2006 2005
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LONG-LIVED ASSETS WITHIN :
-PRC, excluding Hong Kong & Macao $ 98,604 $ 100,372
-Macao 77 88
-Hong Kong 368 281
-----------------------
Total long-lived assets $ 99,049 $ 100,741
=======================
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