Nam Tai Property Inc. Reports Q4 2014 Results

SHENZHEN, China, February 2, 2015 /PRNewswire/ -- Nam Tai Property Inc. ("Nam Tai" or the "Company") (NYSE Symbol: NTP) today announced its unaudited results for the fourth quarter ended December 31, 2014. The Company's original core manufacturing business of LCM module, including Wuxi and Shenzhen production operations for the current and prior periods, was classified as "discontinued operations" and disclosed in the statement of comprehensive income separately under the income (loss) from discontinued operations (net of tax) and not included in the presentation of rental income, net rental income and operating loss that form parts of the operating loss of "continuing operations" and reported as the following:

KEY HIGHLIGHTS

(In thousands of US Dollars, except per share data, percentages and as otherwise stated)

SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE FOURTH QUARTER OF 2014
Key Highlights of Financial Position

OPERATING RESULTS

Rental income, net rental income and operating loss for the fourth quarter of 2014 and the same quarter of 2013 were presented excluding the discontinued operations (Shenzhen and Wuxi facilities). Rental income was mainly derived from properties and land located in Shenzhen. Operating loss for the fourth quarter of 2014 was $6.0 million, an increase of $4.3 million, compared to operating loss of $1.7 million in the fourth quarter of last year. Operating loss for the twelve months ended December 31, 2014 was $12.1 million, an increase of $4.7 million compared to operating loss of $7.4 million in the same period of last year.

With respect to the discontinued operations (Shenzhen and Wuxi facilities), for the fourth quarter of 2014 and the same period of 2013, net sales were nil and $234.9 million, gross profit was nil and $20.4 million, and operating income was $0.7 million and $6.9 million, respectively. For the twelve months ended December 31, 2014 and December 31, 2013, the net sales were $53.2 million and $902.9 million, gross profit was $2.8 million and $67.1 million, and operating (loss) income was ($20.4) million and $5.0 million, respectively.

After considering the income from discontinued operations (net of tax), net loss in the fourth quarter of 2014 was $4.9 million, or loss of $0.11 per diluted share, compared to net income of $9.2 million, or income of $0.20 per diluted share in the fourth quarter of last year. Net loss primarily comprised of (i) loss of $5.8 million from continuing operations in the fourth quarter of 2014 (mainly included accrual of compensation for loss of office of $3.0 million and loss on exchange difference of $2.3 million), compared to $3.5 million income in the same period of last year, (ii) the $0.9 million income from discontinued operations (net of tax) in the fourth quarter of 2014, which mainly due to the reversal for bad debt provision of $1.2 million where cash was received, offset by loss on disposal of fixed assets of $0.3 million, compared to income of $5.8 million in the same period of last year

Net loss for the twelve months ended December 31, 2014 was $25.6 million, or loss of $0.58 per diluted share, compared to net income of $0.3 million, or earnings of $0.01 per diluted share, in the same period of last year. Net loss in 2014 was primarily comprised of (i) the $20.2 million loss from discontinued operations (net of tax) for the twelve months ended December 31, 2014, which mainly included impairment charge of $19.0 million on assets held for sale and land repurchased from the local government in Wuxi and loss of $3.2 million on write-off certain leasehold improvements, compared to $5.0 million loss (mainly including impairment charge on fixed assets of $35.0 million), in the same period of last year, and (ii) loss of $5.4 million from continuing operations for the twelve months ended December 31, 2014, compared to income of $5.3 million in the same period of last year, mainly due to loss on exchange difference of $3.7 million, which resulted from the depreciation of RMB against USD during 2014.

Please see page 6 of the Company's Condensed Consolidated Statements of Comprehensive Income for further details. This information has also been published on the Company's website at http://www.namtai.com/investors#investors/quarterly_earnings in the quarterly earnings report of Q4 2014 on page 6, Condensed Consolidated Statements of Comprehensive Income.

COMPANY OUTLOOK

With the cessation of the LCM business in April 2014, the Company has been focusing its effort in developing the land parcels in Shenzhen.

In relation to the land parcels (in Guangming and Gushu) in Shenzhen, the construction permit application processes have been proceeding smoothly, and we believe that we can obtain the necessary permits and approvals to carry out the next stages of our property development projects on schedule.

For the Guangming project (Phase 1), the construction permit application processes have been proceeding smoothly, and we are in the process of selecting the suitable and qualified professional architectural firm for the next stage of the project. The construction phase of the Guangming project (Phase 1) is expected to commence in Q1 of 2016. The Guangming project (Phase 2) will commence upon the completion of Guangming project (Phase 1). Based on the current timetable, the construction at the Gushu area is expected to commence no earlier than 2017.

A summary of our planned gross floor area ("GFA") of the two Shenzhen land parcels is as follows:

Please note that the eventual plot ratio and GFA for the two parcels of land could be different from the above, are subject to the final approval of the relevant authorities in China.

Overall, the real estate market in China has shown signs of continuous slow down. It has been reported that Shenzhen is the only first-tier city in China that has recorded modest increases in the average selling price of properties sold recently. Since our land is located in Shenzhen, the demand in property market has remained healthy.

As previously announced, we are in the process of seeking potential joint venture partners for the development of the land parcels in Shenzhen. To this effect, we have engaged external agents to source suitable, capable and experienced joint venture partners. Before a joint venture partner is secured, we will work with other external professional firms in all material matters concerning our permit applications. In the event that no suitable joint venture partners can be found, we will continue with the land development projects mainly by relying on and supported by external professional firms. At this juncture, we do not foresee any immediate difficulties in the application process. We will continue to make announcements from time to time to keep shareholders informed about material developments.

As for our Wuxi plant, all production line machinery has been sold and the factory building continues to be listed for sale.

The current headcount of our Group is approximately 60 and we believe that our overhead expenses are under control. We currently derive a majority of our income from rental and interest income. Any future reductions in the official cash deposit interest rates in China and Hong Kong could adversely impact our income. As of December 31, 2014, total cash was $258 million (net of the $40 million HSBC loan). As a result of our cash position, we believe our finances remain healthy to fund the initial stages of these property development projects in the next two to three years. However, the total cash on hand will gradually reduce as more funds are being used for land development related expenditures, which will be capitalized on the balance sheets, for the land in Gushu and Guangming, Shenzhen. We do not anticipate future fluctuation of the USD against RMB to impact us much as a majority, if not all, of the payments for operations are denominated in RMB. However, as our reporting currency is in USD, the fluctuation of RMB against USD will impact our financial statements where the PRC operating results and financial position are translated to USD for reporting purposes. All our land development related applications are subject to government policies and regulations in the real estate market. However, we cannot assure you that we will obtain all the necessary approvals in accordance with our timetable. Furthermore, this is our first venture into the land development projects after the cessation of the LCM business, we may encounter industry-specific difficulties that result in losses as we progress with our projects in Shenzhen.

The information contained in or that can be accessed through the website mentioned in this announcement does not form part of this announcement.

SHARE REPURCHASE PROGRAM UPDATE

The stock repurchase program announced on May 7, 2014 was completed on November 28, 2014. The share repurchase has been conducted in accordance with Rule 10b-18 of the Securities and Exchange Act of 1934. During this 6-month period, we have bought back a total of 2,669,413 common shares from the open market for a total consideration of $17.6 million (represents an average price of $6.56 per share). The $40.0 million loan from HSBC to finance the share repurchase program will be repaid in May 2015 upon maturity.

PAYMENT OF QUARTERLY DIVIDENDS FOR 2014 and 2015

As announced on December 19, 2014, the Company has set the payment schedule of quarterly dividends for 2015. The dividend for Q1 2015 was paid on January 20, 2015.

The following table updates the previously announced schedule for declaration and payment of quarterly dividends in 2015.

The Company's decision to continue dividend payments in 2015 as set out and confirmed in the above table does not necessarily mean that cash dividend payments will continue thereafter. Whether future dividends after 2015 are to be declared will depend upon the Company's future growth and earnings at each relevant period, of which there can be no assurance, and the Company's cash flow needs for business transformation. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2015, and we also cannot assure you that the amounts of such dividends will be or whether such dividends, once declared for a specific period, will continue for any future period, or at all.

PROPOSED SCHEDULE OF RELEASE OF QUARTERLY FINANCIAL RESULTS FOR 2015

To maintain the efficiency of delivering the Company's quarterly financial results to the market, the Company's management has decided to follow approximately the same schedule of 2014 to release the quarterly financial results for 2015. Details of the expected quarterly release dates are as follows:

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

Certain statements included in this press release, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "plan", "seek" or "believe". These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activities, performance, or achievements expressed or implied by the forward-looking statements, including, but not limited to, delay in the Company's ability to obtain all requisite permits and approvals from relevant government authorities in relation to the redevelopment of two parcels of properties in Gushu, Shenzhen, and Guangming, Shenzhen, respectively, and the successfully redevelopment of the two parcels of properties; the sufficiency of the Company's cash position and other sources of liquidity to fund its property developments; continued inflation and appreciation of the Renminbi against the US dollar; rising labor costs in China and changes in the labor supply and labor relations. In particular, you should consider the risks outlined under the heading "Risk Factors" in our most recent Annual Report on Form 20-F and in our Current Report filed from time to time on Form 6-K. The Company's decision to continue dividend payments in 2015 does not necessarily mean that dividend payments will continue thereafter. Whether future dividends will be declared depend upon the Company's future growth and earnings, of which there can be no assurance, as well as the Company's cash flow needs for further expansion. Accordingly, there can be no assurance that cash dividends on the Company's common shares will be declared beyond those declared for 2015, what amount those dividends may be or whether such dividends, once declared for a specific period, will continue for any future period, or at all; and whether we will purchase any of our shares in the open markets or otherwise. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not rely upon forward-looking statements as predictions of future events. These forward-looking statements apply only as of the date of this press release; as such, they should not be unduly relied upon as circumstances change. Except as required by law, we are not obligated, and we undertake no obligation, to release publicly any revisions to these forward-looking statements that might reflect events or circumstance occurring after the date of this release or those that might reflect the occurrence of unanticipated events.

ABOUT NAM TAI PROPERTY INC.

Upon the cessation of our LCM manufacturing business in April 2014, we formally transformed our core business from the EMS industry to property development and management. We currently focus our efforts on redeveloping two parcels of land in Gushu and Guangming, Shenzhen, China, by converting these two parcels of land into high-end commercial complexes. Subsequently, we believe our principal income in the future will be derived from the rental income from the commercial complexes.

Nam Tai Property Inc. is a corporation registered in the British Virgin Islands and listed on the New York Stock Exchange (Symbol: "NTP").

Please refer to the Nam Tai website (www.namtai.com) or the SEC website (www.sec.gov) for Nam Tai press releases and financial statements.

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