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TechFaith Reports Second Quarter 2012 Financial Results

BEIJING, Aug. 16, 2012 /PRNewswire-Asia/ -- China TechFaith Wireless Communication Technology Limited (NASDAQ: CNTF) ("TechFaith" or the "Company") today announced its unaudited financial results for the second quarter ended June 30, 2012.

For the second quarter of 2012, TechFaith reported revenue of US$32.4 million compared to US$42.7 million in the first quarter of 2012 and US$82.8 million in the second quarter of 2011. This is in line with the Company's prior guidance for revenue in the second quarter of 2012 to be in the range of US$32.0 million to US$36.0 million. The revenue decline is primarily due to increased levels of competition for the Company's high-end smart phones.  Gross profit for the second quarter of 2012 was US$7.3 million, compared to US$10.8 million in the first quarter of 2012.  Gross margin for the second quarter of 2012 was 22.6%, compared to 25.4% in the first quarter of 2012.  The decline in gross margin is mainly due to lower revenue and pricing pressure resulting from the competitive environment.  Net loss attributed to TechFaith for the second quarter of 2012 was US$0.7 million or US$0.01 loss per basic and diluted ADS, compared to a net loss of US$0.4 million or US$0.01 loss per basic and diluted ADS in the first quarter of 2012.

Miss Ouyang Yuping, TechFaith's Chief Financial Officer, said, "Revenue in the quarter came in at the lower end of our guidance due to continued weakness in our ODP and branded mobile phone business.  We expect that the mobile phone business environment will remain extremely difficult in the near-term.  The impact of lower revenue in the quarter and increasing competition again impacted our gross margin and resulted in a net loss for the quarter.  We continue to evaluate and work to adjust our resources to better meet the current challenging business environment."

Mr. Deyou Dong, President and Chief Operating Officer of TechFaith, said, "Our focus remains on developing unique smart phones and mobile devices targeting niche and enterprise segments.  We understand the market and our business is in a period of contraction.  We remain focused on working closely with customers to develop the tailored solutions they need.  TechFaith's ability to service these market segments will ultimately help us stabilize our business level and return to both revenue growth and profitability."   

Mr. Defu Dong, Chairman and Chief Executive Officer of TechFaith, said, "As part of our ongoing strategic review and efforts to restore our business growth, we have started to shift our gaming business focus from hardware sales to software packages and applications. We believe that these changes will help us strengthen our user base and ultimately revitalize this business segment."

Third Quarter of 2012 Outlook

The below forecast is TechFaith's current and preliminary view, which is subject to change.  TechFaith currently expects total revenue for the third quarter of 2012 to be in the range of US$ 30.0 million to US$ 35.0 million.

Investor Conference Call / Webcast Details

TechFaith will hold a conference call on Thursday, August 16, 2012 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Thursday, August 16, 2012 in Beijing). The dial-in phone number is +1-617-597-5309 or +1-866-713-8395. The conference call passcode is 30042849. 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 through 10 p.m. U.S. Eastern Time on August 23, 2012, (10 a.m., August 24, 2012 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 85042381.  A webcast replay will also be available at http://www.techfaithwireless.com.

About TechFaith

TechFaith (NASDAQ: CNTF) has three primary businesses. Under the TechFaith umbrella, the Company is a leading global mobile solutions provider for the global mobile handsets market (previously called the ODP (Original Developed Product) business)). Under its TecFace brand, 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 17VEE brand, 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.comwww.17vee.com and www.798game.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 OPERATIONS

(In Thousands of U.S. Dollars, except share and per share/ADS data and unless otherwise stated)










Three Months

Ended


Three Months Ended


Six Months Ended

March 31


June 30


June 30


2012


2012

2011


2012

2011









Revenues:








ODP

$18,945


$13,470

$55,917


$32,415

$109,725

Brand name phone sales

15,535


11,785

16,179


27,320

31,093

Game

8,196


7,151

10,690


15,347

20,648

Total net revenues

$42,676


$32,406

$82,786


$75,082

$161,466









Cost of revenues:








ODP

$17,511


$13,661

$45,141


$31,172

$85,506

Brand name phone sales

9,847


7,680

10,086


17,527

18,985

Game

4,486


3,746

5,811


8,232

9,932

Total cost of revenues

$31,844


$25,087

$61,038


$56,931

$114,423









Gross Profit

$10,832


$7,319

$21,748


$18,151

$47,043









Operating expenses:








General and administrative

$1,456


$1,512

$6,895


$2,968

$11,338

Research and development

2,962


2,179

2,755


5,141

6,034

Selling and marketing

5,356


4,626

2,767


9,982

5,119

Total operating expenses

$9,774


$8,317

$12,417


$18,091

$22,491









Government subsidy income

89


-

77


89

77

Other operating income

99


269

545


368

1,083









Income (loss) from operations

$1,246


$(729)

$9,953


$517

$25,712









Interest income

446


635

338


1,081

615

Investment income

-


-

-


-

883

Other income

-


4

-


4

1

Income (loss) before income taxes

$1,692


$(90)

$10,291


$1,602

$27,211

Income tax expenses

(1,692)


(278)

(2,367)


(1,970)

(4,534)

Net (loss) income

$0


$(368)

$7,924


$(368)

$22,677

Less: net income attributable to the noncontrolling interest

(413)


(346)

(586)


(759)

(1,512)

Net income(loss) attributable to TechFaith

$(413)


$(714)

$7,338


$(1,127)

$21,165









Net income (loss) attributable to TechFaith per share








  Basic

$(0.00)


$(0.00)

$0.01


$(0.00)

$0.03

  Diluted

$(0.00)


$(0.00)

$0.01


$(0.00)

$0.03









Net income (loss) attribute to TechFaith per ADS








  Basic

$(0.01)


$(0.01)

$0.14


$(0.02)

$0.40

  Diluted

$(0.01)


$(0.01)

$0.14


$(0.02)

$0.40









Net income

$0


$(368)

$7,924


$(368)

$22,677

Other comprehensive income (loss), net of tax

     Foreign currency translation

     adjustment

(273)


(3,093)

3,442


(3,366)

5,432

Comprehensive income (loss)

(273)


(3,461)

11,366


(3,734)

28,109









Less: Comprehensive income attributable to noncontrolling interest

(402)


(159)

(586)


(561)

(1,512)

Comprehensive income (loss) attributable to TechFaith

$(675)


$(3,620)

$10,780


$(4,295)

$26,597









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)














June 30, 2012


March 31, 2012


December 31, 2011







Assets






Current assets:






Cash and cash equivalents

$252,033


$248,319


$250,637

Restricted cash

26


-


-

Accounts receivable

2,246


2,825


6,715

Inventories

8,771


8,031


7,984

Prepaid expenses and other current assets

14,520


14,715


17,560

Deferred tax assets-current

222


219


207

Total current assets

$277,818


$274,109


$283,103







Plant, machinery and equipment, net

$44,926


$46,235


$48,977

Land use rights

10,547


10,695


10,755

Construction in progress

22,757


22,738


21,002

Acquired intangible assets, net

7,563


6,469


2,327

Goodwill

1,242


1,242


1,242

Deferred tax assets-noncurrent

1


4


3

Total assets

$364,854


$361,492


$367,409







Liabilities and shareholders' equity






Current liabilities:












Accounts payable (including accounts payable of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology Limited, $nil, $nil and $nil as of June 30, 2012, March 31, 2012 and December 31, 2011 respectively)

9,414


8,846


8,792

 

Accrued expenses and other current liabilities(including accrued expenses and other current liabilities of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology Limited, $831, $854 and $837 as of as of June 30, 2012, March 31, 2012 and December 31, 2011 respectively)

15,639


15,203


21,721

 

Advance from customers(including advance from customers of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology Limited, $212 and $213 and $202 as of June 30, 2012, March 31, 2012 and December 31, 2011 respectively)

8,681


8,742


8,492

 

Deferred revenue (including deferred revenue of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology Limited, $nil, $nil and $nil as of June 30, 2012, March 31, 2012 and December 31, 2011 respectively)

2,111


695


219

 

Income tax payable (including income tax payable of consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology Limited, $23, $23 and $21 as of June 30, 2012, March 31, 2012 and December 31, 2011 respectively)

439


1,593


1,804

 

Short-term loan (including short-term loan of the consolidated variable interest entities without recourse to China TechFaith Wireless Communication Technology Limited, $nil, $nil and $nil as of June 30, 2012, March 31, 2012 and December 31, 2011 respectively)

5,350


-


-

Total current liabilities

$41,634


$35,079


$41,028







Long-term loan

290


290


290

Deferred tax liability-noncurrent

89


98


106







Total liabilities

$42,013


$35,467


$41,424







Shareholders' equity






Paid in capital

$16


$16


$16

Additional paid-in capital

142,268


141,980


141,667

Accumulated other comprehensive income

40,418


43,324


43,597

Statutory reserve

22,631


22,631


22,631

Retained earnings

96,145


96,859


97,272

Total TechFaith shareholders' equity

$301,478


$304,810


$305,183

Noncontrolling interest

$21,363


$21,215


$20,802

Total shareholders' equity

$322,841


$326,025


$325,985

Total liabilities and shareholders' equity

$364,854


$361,492


$367,409








SOURCE China TechFaith Wireless Technology Limited

In China: Jay Ji, China TechFaith Wireless Communication Technology Limited, +86-10-5822-8390, ir@techfaith.cn; In the U.S.: David Pasquale, Global IR Partners, +1-914-337-8801, cntf@globalirpartners.com


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