TechFaith Reports Fourth Quarter and Full Year 2012 Financial Results PR Newswire BEIJING, March 12, 2013 BEIJING, March 12, 2013 /PRNewswire/ -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced its unaudited financial results for the fourth quarter and the full year ended December 31, 2012. For the fourth quarter of 2012, TechFaith reported net revenues of US$31.0 million compared to US$31.5 million in the third quarter of 2012. Gross profit for the fourth quarter of 2012 was US$5.9 million compared to US$7.2 million in the third quarter of 2012. Gross margin for the fourth quarter was 19.1% compared to 22.8% in the previous quarter. Net loss attributed to TechFaith for the fourth quarter of 2012 was US$3.0 million or US$(0.06) per basic and diluted weighted average outstanding ADS, compared to net income of US$0.9 million or US$0.02 per basic and diluted weighted average outstanding ADS in the third quarter of 2012. For the full year ended December 31, 2012, TechFaith reported net revenues of US$137.7 million compared to US$323.8 million for the full year ended December 31, 2011. The decline in revenues was mainly due to higher levels of competition, which led to a material decline in the Company's Original Developed Product (ODP) and game business, and the negative impact of our shift from Windows Mobile-based smartphones to Android-based smartphones. Gross profit for the full year 2012 was US$31.3 million compared to US$85.2 million for the full year 2011. Gross margin for the full year 2012 was 22.7% compared to 26.3% for the full year 2011. Operating expenses for the full year 2012 were US$31.1 million compared to US$50.2 million for the full year 2011. Net loss for full year 2012 was US$3.3 million or US$ (0.06) per basic and diluted weighted average outstanding ADS, compared to net income of US$27.1 million or US$0.51 per basic and diluted weighted average outstanding ADS for the full year 2011. Ms. Ouyang Yuping, TechFaith's Chief Financial Officer, said, "It was a very challenging year for TechFaith as we were impacted by global economic weakness and higher levels of competition. We kept strict operating controls in place to help us weather the volatility in the market. Specifically, we reduced our operating expenses by 38.0% for the full year. It is also worth noting that despite the significant decline in our revenues, we were able to hold gross margin at 22.7% for the full year 2012 by focusing on higher margin, niche business opportunities. Our balance sheet continues to give us the ability to pursue the long-term business initiatives and strategy that are central to our company's success, even with higher levels of competition and further expected market volatility." Mr. Deyou Dong, President and Chief Operating Officer of TechFaith, said, "2012 was a tough year for us as we faced a steep unit volume reduction in our mobile phone business and difficult business environments in the key segments we operate. We made the shift to Android smartphones but would have benefited from shifting earlier in the product cycle.We understand the markets that we are operating in, which are characterized by tough competition, fast changes, high uncertainty and margin pressure in the mobile phone business. Our ability to succeed in the niche segments we are targeting and our track record of product innovations, ranging from improved imaging and bigger capacitive touch screens, is helping us to keep on track even with the expected continuation of headwinds and high levels of competition. For example, customer response remains positive for our ruggedized devices. This is a product line that leverages our strong hardware design capabilities and meets a unique need in a profitable niche market. With that said, this is also a global market that we see as having significant potential. We are pursuing other opportunities in middle to high-end mobile handsets that leverage our strengths in both domestic and international markets as we work to return to sustainable growth and profitability." Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "We are focused on pursuing the opportunities that will put the rough 2012 behind us. We have successfully navigated similar tough market situations in the past and we are confident in our ability to do so once again. The big difference between our current situation and our less profitable prior transition periods is that our core business is now moving forward on a larger scale and we now have a much stronger balance sheet. We continue to refresh our product portfolio, which differentiates TechFaith in the niche markets we are going after, through unique hardware offerings. We provide carriers and partners unique solutions that address unmet mobile needs in the outdoor adventure market and in the market for highly sensitive medical monitoring applications.Because we are operating from a position of financial strength, we are able to pursue the long-term strategy that is essential to the Company's success and to creating value for our shareholders. For example, we recently announced we would promote 3D motion sensing technology, delivery platforms and games in China. This is an exciting new area in the gaming market that allows us to leverage our motion gaming expertise. We have previously built motion gaming content and distribution assets and understand the potential 3D has to give gamers an even more entertaining experience. We are optimistic about this opportunity and others in the core mobile communications area, which have growth potential in 2013." First Quarter of 2013 Outlook The below forecast is TechFaith's current and preliminary view, which is subject to change. TechFaith currently expects total revenues for the first quarter of 2013 to be in the range of US$28.0 million to US$33.0 million. Investor Conference Call / Webcast Details TechFaith will hold a conference call on Tuesday, March 12, 2013 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Tuesday, March 12, 2013 in Beijing).The dial-in number for the live audio call is +1-617-213-8849 or +1-866-203-3436. The conference call passcode is 38061147. A live webcast of the conference call will also be available on TechFaith's website at www.techfaithwireless.com. A replay of the call will be available approximately 2 hours after the conclusion of the live call by telephone at +1-617-801-6888, with passcode 86477094. A webcast replay will also be available at www.techfaithwireless.com. About TechFaith TechFaith (NASDAQ: CNTF) has three primary businesses. The Company is a leading global mobile solutions provider for the global mobile handsets market (previously called the ODP (Original Developed Product) business)). The Company is a leading developer of specialized mobile phones for differentiated market segments, including the rapidly growing smartphone market targeting wireless mobile phone network operators and end users; the Company also serves sports enthusiasts with a tailored line under the Jungle brand and the teen market under licensed brands. Under the Company's 17FOX brand (previously "17VEE"), the Company has built a leading intellectual property based motion gaming business ranging from Bluetooth-enabled motion gaming controllers and software to a planned proprietary set-top motion game box. For more information, please visit www.techfaithwireless.com. Safe Harbor Statement This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident," "outlook" and similar statements. Among other things, the business outlook and strategic and operational plans of TechFaith and management quotations contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law. CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of U.S. Dollars, except share and per share/ADS data and unless otherwise stated) ThreeMonthsEnded Three Months Ended Twelve Months Ended September 30 December 31 December 31 2012 2012 2011 2012 2011 Revenues: ODP $13,311 $12,077 $50,711 $57,803 $212,784 Brand name 11,329 11,617 19,274 50,266 67,535 phone sales Game 6,909 7,338 11,702 29,594 43,481 Total net $31,549 $31,032 $81,687 $137,663 $323,800 revenues Cost of revenues: ODP $12,222 $10,577 $45,062 $53,971 $174,991 Brand name 7,783 8,940 11,916 34,250 41,280 phone sales Game 4,337 5,577 5,630 18,146 22,293 Total cost of $24,342 $25,094 $62,608 $106,367 $238,564 revenues Gross Profit $7,207 $5,938 $19,079 $31,296 $85,236 Operating expenses: General and $669 $1,957 $4,384 $5,594 $18,848 administrative Research and 2,192 2,010 3,820 9,343 13,541 development Selling and 1,545 801 7,652 12,328 17,196 marketing Impairment of intangible 702 3,131 - 3,833 - assets Impairment of - - - - 606 goodwill Total operating $5,108 $7,899 $15,856 $31,098 $50,191 expenses Government 99 44 36 232 224 subsidy income Other operating 281 475 683 1,124 2,824 income Income (loss) from $2,479 $(1,442) $3,942 $1,554 $38,093 operations Interest 523 428 388 2,032 1,365 income Other (expenses) (313) 663 (83) 354 (79) income Change in fair value of put (90) (60) (150) (150) (150) option Income (loss) before income $2,599 $(411) $4,097 $3,790 $39,229 taxes Income tax (1,518) (2,147) (636) (5,635) (9,419) expenses Net income $1,081 $(2,558) $3,461 $(1,845) $29,810 (loss) Less: net income attributable (205) (485) (776) (1,449) (2,683) to the noncontrolling interest Net income (loss) attributable $876 $(3,043) $2,685 $(3,294) $27,127 to TechFaith Net income (loss) attributable to TechFaith per share Basic $0.00 $(0.00) $0.00 $(0.00) $0.03 Diluted $0.00 $(0.00) $0.00 $(0.00) $0.03 Net income (loss) attribute to TechFaith per ADS Basic $0.02 $(0.06) $0.05 $(0.06) $0.51 Diluted $0.02 $(0.06) $0.05 $(0.06) $0.51 Net income $1,081 $(2,558) $3,461 $(1,845) $29,810 (loss) Other comprehensive income, net of tax Foreign currency 4,008 2,894 3,960 3,525 13,026 translation adjustment Comprehensive 5,089 336 7,421 1,680 42,836 income Less: Comprehensive income attributable (482) (706) (1,303) (1,749) (3,210) to noncontrolling interest Comprehensive income (loss) $4,607 $(370) $6,118 $(69) $39,626 attributable to TechFaith Weighted average shares outstanding Basic 794,003,193 794,003,193 794,003,193 794,003,193 794,003,193 Diluted 794,003,193 794,003,193 794,003,193 794,003,193 794,003,193 CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands of U.S. Dollars) December31, September30,2012 December31,2011 2012 Assets Current assets: Cash and cash equivalents $257,950 $265,044 $250,637 Accounts receivable 8,666 4,552 6,715 Inventories 7,490 6,486 7,984 Prepaid expenses and other current 15,678 20,528 17,560 assets Deferred tax assets-current - 226 207 Total current assets $289,784 $296,836 $283,103 Plant, machinery and equipment, net $44,084 $44,214 $48,977 Land use rights, net 10,645 10,607 10,755 Construction in progress 36,530 26,688 21,002 Acquired intangible assets, net 4,061 6,306 2,327 Goodwill 1,242 1,242 1,242 Deferred tax assets-noncurrent - 1 3 Total assets $386,346 $385,894 $367,409 Liabilities and shareholders' equity Current liabilities: Accountspayable(includingaccounts payable of the consolidated variable interest entities without recourse toChina TechFaith Wireless Communication 11,140 10,176 8,792 Technology Limited, $nil, $nil and $nil as of December 31, 2012, September 30, 2012 and December 31, 2011 respectively) Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated variable interest entities without recourse 13,464 14,364 21,721 to China TechFaith Wireless Communication Technology Limited, $184, $684 and $837 as of as of December 31, 2012, September 30, 2012 and December 31, 2011 respectively) Advance from customers (including advance from customers of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology 9,173 9,324 8,492 Limited, $nil and $217 and $202 as of December 31, 2012, September 30, 2012 and December 31, 2011 respectively) Deferred revenue (including deferred revenue of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication 4,178 4,584 219 Technology Limited, $nil, $nil and $nil as of December 31, 2012, September 30, 2012 and December 31, 2011 respectively) Income tax payable (including income tax payable of consolidated variable interest entities without recourse to China TechFaith Wireless Communication 1,062 660 1,804 Technology Limited, $21, $21 and $21 as of December 31, 2012, September 30, 2012 and December 31, 2011 respectively) Short-term loan (including short-term loan of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication 15,350 15,350 - Technology Limited, $nil, $nil and $nil as of December 31, 2012, September 30, 2012 and December 31, 2011 respectively) Total current liabilities $54,367 $54,458 $41,028 Long-term loan 290 290 290 Deferred tax liability-noncurrent - 81 106 Total liabilities $54,657 $54,829 $41,424 Shareholders' equity Paid in capital $16 $16 $16 Additional paid-in capital 142,837 142,549 141,667 Accumulated other comprehensive 46,822 44,149 43,597 income Statutory reserve 23,137 22,631 22,631 Retained earnings 93,472 97,021 97,272 Total TechFaith shareholders' equity $306,284 $306,366 $305,183 Noncontrolling interest $25,405 $24,699 $20,802 Total shareholders' equity $331,689 $331,065 $325,985 Total liabilities and shareholders' $386,346 $385,894 $367,409 equity SOURCE China TechFaith Wireless Technology Limited Website: http://www.techfaithwireless.com Contact: In China: Jay Ji, China Techfaith Wireless Communication Technology Limited, +86-10-5822-8390, email@example.com or In the U.S.: David Pasquale, Global IR Partners, +1 914-337-8801, firstname.lastname@example.org
TechFaith Reports Fourth Quarter and Full Year 2012 Financial Results
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