Nam Tai Property Inc. Reports Q2 2017 Results

KEY HIGHLIGHTS

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

Quarterly Results

Half year Results

Q2 2017

Q2 2016

YoY(%)^(d)

1H 2017

1H 2016

YoY(%)^(d)

Operation income

$

541

$

637

(15)

$

1,135

$

1,291

(12)

Net operation income

$

541

$

347

56

$

1,135

$

551

106

% of operation income

100

%

54.5

%

100

%

42.7

%

Operating loss

$

(2,337)

$

(1,506)

—

$

(3,727)

$

(3,525)

—

% of operation income

(432.0)

%

(236.4)

%

(328.4)

%

(273.0)

%

per share (diluted)

$

(0.06)

$

(0.04)

—

$

(0.10)

$

(0.10)

—

Net income (loss) ^{(a) (b)}

$

2,085

$

(2,643)

—

$

3,899

$

(2,984)

—

% of operation income

385.4

%

(414.9)

%

343.5

%

(231.1)

%

Basic income (loss) per share

$

0.06

$

(0.07)

—

$

0.11

$

(0.08)

—

Diluted income (loss) per share

$

0.06

$

(0.07)

—

$

0.10

$

(0.08)

—

Weighted average number of shares ('000)

Basic

36,575

36,700

36,518

36,700

Diluted

37,210

36,700

37,138

36,700

Notes:

(a) Net income for the three months ended June 30, 2017 mainly included exchange gain of $2.7 million as a result of the appreciation of Renminbi against US dollars in Q2 2017, interest income of $1.8 million earned from time deposits and net operation income $0.5 million, but partly offset by general and administrative expenses of $2.9 million. 

(b) Net income for the six months ended June 30, 2017 mainly included interest income of $4.3 million earned from time deposits, exchange gain of $3.5 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2017 and net operation income $1.1 million, but partly offset by general and administrative expenses of $4.9 million. 

(c) Capitalization on project investment was $3.5 million for Q2 2017, totaling $4.9 million for the first half of year 2017 and our accumulated project investment was $43.6 million up to June 30, 2017, which was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017.

(d)  Percentage change is not applicable if either of the two periods contains a loss.

(e)  This information has been published on the Company's website http://www.namtai.com/investors#investors/quarterly_earnings under the quarterly earnings report of Q2 2017 on page 7, Condensed Consolidated Statements of Comprehensive Income.

(f)   Attached please find the unaudited financial results cut off July 28, 2017 for additional reference.

SUPPLEMENTARY INFORMATION (UNAUDITED) IN THE SECOND QUARTER OF 2017
Key Highlights of Financial Position

As at
June 30,

As at December 31,

As at
June 30,

2017

2016

2016

Cash, cash equivalents and short term

   investments

$170.7 million^(a)

$184.2 million

$199.7million

Ratio of cash^(b) to current liabilities

16.34

14.79

52.60

Current ratio

18.56

16.63

58.69

Ratio of total assets to total liabilities

24.39

19.98

69.31

Return on equity

3.2

%

(3.8)

%

(2.3)

%

Ratio of total liabilities to total equity

0.04

0.05

0.01

Notes:

(a)         As compared with December 31, 2016, the decrease of $13.5 million in the cash, cash equivalents and short term investments was mainly due to the payments of $13.4 million for new office premises and $3.0 million being made for land development project and accordingly was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017, partly offset by the exchange gain of $3.2 million as a result of the appreciation of Renminbi against US dollars during the six months ended June 30, 2017.

(b)         Cash in the financial ratio included cash, cash equivalents and short term investments in the amount of $170.7 million, $184.2 million and $199.7 million as at June 30, 2017, December 31, 2016 and June 30, 2016 respectively. As compared with June 30, 2016, the decrease of $29.0 million in the cash, cash equivalents and short term investments was mainly due to the payments of $13.4 million for new office premises, $6.6 million for dividend payment, $5.3 million being made for land development project and accordingly was recorded under the account of real estate properties under development in the balance sheet as at June 30, 2017, and the exchange loss of $0.8 million as a result of the depreciation of Renminbi against US dollars from June 30, 2016 to June 30, 2017.

Inno Park

Shenzhen, Guangming

          (Approved)              

Inno City

Shenzhen, Gushu

            (Planned)         

(In square meters, except plot ratios)

Land area

103,739

52,625

Plot ratios

2.59

6.00

Office

175,406

Office + Soho

187,880

Apartment

61,000

Apartment

48,300

Gross floor area (GFA)

Commercial

28,594

Commercial

25,000

Other

4,159

Other

7,200

269,159

268,380

Underground floor area

80,000

Total construction floor area (CFA)

331,832

348,380

Remark

The above figures are subject to adjustment upon the final approval of the relevant authorities in China.

Main Certificates

Estimated Completion Time

Inno Park

Inno City

2017

2018

2019

2020

2021

A

Land Use Permit

Obtained Jun 4, 2015

Mar. 2018

*

B

Land Certificate

Obtained Sep 21, 2015

Jun. 2018

*

C

Planning Permit for Construction Engineering

Aug. 2017

Jul. 2018

#

*

D

D1

Early Construction Permit for Pile Foundation

May. 2017

-----

#

D2

Construction Permit for Project

Nov. 2017

Nov. 2018

#

*

D3

Main Construction Acceptance

May. 2019

Sep. 2020

#

*

D4

Completion Time

Sep. 2019

Jan. 2021

#

*

E

Real Estate Certificate

Mar. 2020

Jul. 2021

#

*

Remark

1. Number signs # represent "Inno Park", while stars * are for "Inno City".

2. The construction of "Inno Park" has commenced from April 2017.

3. The construction of "Inno City" is expected to commence before December 2018.

Total Cost

Inno Park

Inno City

(In millions of US dollars)

Construction Cost

$   312

$    415

Operation Cost

69

43

Total

$   381

$    458

Remark

The $839 million Schematic Design Estimation was prepared by our quantity surveyor, Currie & Brown, based on a schematic design originally prepared by our architectural design firm. This estimate will be used by us for cost control purposes to monitor the costs of design, construction, and other operations.

This estimation does not include the costs of marketing and interior furnishing. If the developed properties are offered for sale, the costs would also have to include payment for land appreciation tax.

Payment

Record Date

Payment Date

Dividend

(per share)

Status

Q1 2017

December 31, 2016

January 20, 2017

$

0.07

Paid

Q2 2017

March 31, 2017

April 20, 2017

$

0.07

Paid

Q3 2017

June 30, 2017

July 20, 2017

$

0.07

Paid

Q4 2017

September 30, 2017

October 20, 2017

$

0.07

Full Year 2017

$

0.28

Quarter

Date of release

Q1 2017

May 2, 2017 (Tuesday)

Q2 2017

July 31, 2017 (Monday)

Q3 2017

October 30, 2017 (Monday)

Q4 2017

January 29, 2018 (Monday)

NAM TAI PROPERTY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE PERIODS ENDED JUNE 30, 2017 AND 2016

(In Thousands of US dollars except share and per share data)

Unaudited

Three months ended June 30,

Unaudited

Six months ended June 30,

2017

2016

2017

2016

Operation income ⁽¹⁾

$

541

$

637

$

1,135

$

1,291

Operation expense

—

290

—

740

Net operation income

541

347

1,135

551

Costs and expenses

General and administrative expenses

2,878

1,853

4,862

4,076

2,878

1,853

4,862

4,076

Operating loss

(2,337)

(1,506)

(3,727)

(3,525)

Other income (expenses), net ⁽²⁾

2,574

(2,432)

3,302

(2,349)

Interest income

1,848

1,295

4,324

2,890

Income (loss) before income tax

2,085

(2,643)

3,899

(2,984)

Consolidated net income (loss)

2,085

(2,643)

3,899

(2,984)

Other comprehensive income

—

—

—

—

Consolidated comprehensive income (loss) ⁽³⁾

$

2,085

$

(2,643)

$

3,899

$

(2,984)

Earnings (loss) per share

Basic

$

0.06

$

(0.07)

$

0.11

$

(0.08)

Diluted

$

0.06

$

(0.07)

$

0.10

$

(0.08)

Weighted average number of share ('000)

Basic

36,575

36,700

36,518

36,700

Diluted

37,210

36,700

37,138

36,700

Notes:

(1)  The property at phase 2 in Gushu has been rented to a third party lessee with a term of three and a half years since May 2014.

(2)  Other income (expenses), net, included exchange gain of $2.7 million, partly offset by loss from Wuxi operations of $0.1 million for the three months ended June 30, 2017.

(3)   Consolidated comprehensive income for the three months ended June 30, 2017 mainly included exchange gain of $2.7 million as a result of the appreciation of Renminbi against US dollar in the second quarter of 2017, interest income of $1.8 million earned from time deposits and net operation income of $0.5 million, partly offset by general and administrative expenses of $2.9 million.

NAM TAI PROPERTY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2017 AND DECEMBER 31, 2016

(In Thousands of US dollars)

Unaudited

June 30,

Audited

December 31,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents⁽¹⁾

$

115,985

$

94,558

Short term investments⁽¹⁾

54,711

89,624

Prepaid expenses and other receivables

3,775

4,034

Assets held for sale

19,419

18,970

Total current assets

193,890

207,186

Real estate properties under development, net⁽²⁾

43,606

37,779

Property, plant and equipment, net

17,099

3,735

Other assets

104

101

Total assets

$

254,699

$

248,801

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

2,443

$

845

Accrued expenses and other payables

2,877

1,405

Dividend payable

5,124

10,205

Total current liabilities

10,444

12,455

EQUITY

Shareholders' equity:

Common shares

366

364

Additional paid-in capital

243,220

241,536

Retained earnings

10,479

6,607

Accumulated other comprehensive loss⁽³⁾

(9,810)

(12,161)

Total shareholders' equity

244,255

236,346

Total liabilities and shareholders' equity

$

254,699

$

248,801

Note:

(1) According to the definition of "Balance Sheet" under the Financial Accounting Standard Board ("FASB") Accounting Standards Codification ("ASC") 210-10-20, cash equivalents are short-term, highly liquid investments that are readily convertible to cash. Only investments with original maturities of three months or less when purchased qualify under that definition. Therefore, the fixed deposits maturing over three months in amount of $54.7 million and $89.6 million as at June 30, 2017 and December 31, 2016, respectively, are not classified as cash and cash equivalents but are separately disclosed as short term investments in the balance sheet.

(2) Capitalization on project investment was $3.5 million for Q2 2017, totaling $4.9 million for the first half of year and our accumulated project investment was $43.6 million up to June 30, 2017.

(3)  Accumulated other comprehensive loss represented foreign currency translation adjustment.

NAM TAI PROPERTY INC.

CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED JUNE 30, 2017 AND 2016

(In Thousands of US dollars)

Unaudited

Three months ended June 30,

Unaudited

Six months ended June 30,

2017

2016

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated net income (loss)

$

2,085

$

(2,643)

$

3,899

$

(2,984)

Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities:

Depreciation and amortization of property, plant and equipment,
   land use rights and other assets

83

665

159

1,669

Gain on disposal of property, plant and equipment

(22)

(7)

(41)

(7)

Share-based compensation expenses

363

266

603

266

Unrealized exchange (gain) loss

(2,029)

1,373

(2,250)

1,373

Changes in current assets and liabilities:

Decrease in prepaid expenses and other receivables

515

376

273

145

(Decrease) increase in accounts payable

—

(427)

—

287

Increase (decrease) in accrued expenses and other payables

1,159

(458)

1,435

(1,183)

Total adjustments

69

1,788

179

2,550

Net cash provided by (used in) operating activities

$

2,154

$

(855)

$

4,078

$

(434)

CASH FLOWS FROM INVESTING ACTIVITIES

Payment of real estate properties under development

$

(1,566)

$

(2,208)

$

(2,971)

$

(3,255)

Purchase of property, plant & equipment

(13)

(364)

(129)

(416)

(Increase) decrease in deposits for real estate properties under
   development

(186)

(200)

(166)

276

Increase in deposits for purchase of property, plant and equipment

(13,166)

(118)

(13,383)

(113)

Proceeds from disposal of property, plant and equipment

48

7

67

7

Cash received from finance lease receivable

—

323

—

1,371

Decrease (increase) in short term investments

54,835

6,788

34,944

(3,894)

Net cash provided by (used in) investing activities

$

39,952

$

4,228

$

18,362

$

(6,024)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash dividends paid

$

(2,557)

$

(734)

$

(5,108)

$

(1,468)

Proceeds from share issued for option exercise

471

—

874

—

Net cash used in financing activities

$

(2,086)

$

(734)

$

(4,234)

$

(1,468)

Net increase (decrease) in cash and cash equivalents

$

40,020

$

2,639

$

18,206

$

(7,926)

Cash and cash equivalents at beginning of period

73,184

146,797

94,558

157,371

Effect of exchange rate changes on cash and cash equivalents and short term investments

2,781

(3,549)

3,221

(3,558)

Cash and cash equivalents at end of period

$

115,985

$

145,887

$

115,985

$

145,887

NAM TAI PROPERTY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIODS ENDED JUNE 30, 2017 AND 2016

(In Thousands of US dollars)

1. These financial statements, including the consolidated balance sheet as of December 31, 2016, which was derived from audited financial statements, do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's annual report on Form 20-F for the fiscal year ended December 31, 2016.

2. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

3. Accumulated other comprehensive loss represents foreign currency translation adjustments. The consolidated comprehensive income (loss) was $2,085 and $(2,643) for the three months ended June 30, 2017 and 2016, respectively.

4. A summary of the operation income, other income, net, net income (loss) and long-lived assets by geographical areas is as follows:

Three months ended June 30,

Six months ended June 30,

2017

2016

2017

2016

OPERATION INCOME WITHIN:

-PRC, excluding Hong Kong

$

541

$

637

$

1,135

$

1,291

OTHER INCOME (EXPENSES), NET:

- Gain (loss) on exchange difference

$

2,692

$

(2,318)

$

3,539

$

(2,317)

- Interest income from finance lease receivable

—

—

—

16

- Loss from Wuxi operations

(130)

(131)

(296)

(304)

- Others

12

17

59

256

Total other income (expenses), net

$

2,574

$

(2,432)

$

3,302

$

(2,349)

NET INCOME (LOSS) FROM OPERATIONS WITHIN:

- PRC, excluding Hong Kong

$

(504)

$

(673)

$

(832)

$

(1,598)

- Hong Kong

2,589

(1,970)

4,731

(1,386)

Total net income (loss)

$

2,085

$

(2,643)

$

3,899

$

(2,984)

June 30, 2017

December 31, 2016

LONG-LIVED ASSETS WITHIN:

- Real estate properties under development in PRC, excluding Hong Kong

$

43,606

$

37,779

- Property, plant and equipment in PRC, excluding Hong Kong

13,891

507

- Hong Kong

3,208

3,228

Total long-lived assets

$

60,705

$

41,514

NAM TAI PROPERTY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE PERIODS ENDED JULY 28, 2017

(In Thousands of US dollars except share and per share data)

  Unaudited

One month ended July 28, 2017

Unaudited

Seven months ended July 28, 2017

Operation income ⁽¹⁾

$

175

$

1,310

Operation expense

—

—

Net operation income

175

1,310

Costs and expenses

General and administrative expenses

660

5,522

660

5,522

Operating loss

(485)

(4,212)

Other income, net ⁽²⁾

388

3,690

Interest income

571

4,895

Income before income tax

474

4,373

Consolidated net income

474

4,373

Other comprehensive income

—

—

Consolidated comprehensive income ⁽³⁾

$

474

$

4,373

Earnings per share

Basic

$

0.01

$

0.12

Diluted

$

0.01

$

0.12

Weighted average number of shares ('000)

Basic

36,738

36,550

Diluted

37,516

37,185

Notes:

(1)     The property at phase 2 in Gushu has been rented to a third party lessee with a term of three and a half years since May 2014.

(2)     Other income, net, included exchange gain of $0.4 million, partly offset by loss from Wuxi operations of $0.1 million for the one month ended July 28, 2017.

(3)     Consolidated comprehensive income for the one month ended July 28, 2017 mainly included exchange gain of $0.4 million as a result of the appreciation of Renminbi against US dollar, interest income of $0.6 million earned from time deposits and net operation income of $0.2 million, partly offset by general and administrative expenses of $0.7 million.

NAM TAI PROPERTY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT JULY 28, 2017
(In Thousands of US dollars)

Unaudited

July 28,

2017

ASSETS

Current assets:

Cash and cash equivalents⁽¹⁾

$

107,025

Short term investments⁽¹⁾

62,147

Prepaid expenses and other receivables

4,841

Assets held for sale

19,476

Total current assets

193,489

Real estate properties under development, net⁽²⁾

46,098

Property, plant and equipment, net

17,112

Other assets

104

Total assets

$

256,803

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

4,534

Accrued expenses and other payables

2,619

Dividend payable

2,562

Total current liabilities

9,715

EQUITY

Shareholders' equity:

Common shares

370

Additional paid-in capital

245,295

Retained earnings

10,953

Accumulated other comprehensive loss⁽³⁾

(9,530)

Total shareholders' equity

247,088

Total liabilities and shareholders' equity

$

256,803

Note:

(1)     According to the definition of "Balance Sheet" under the Financial Accounting Standard Board ("FASB") Accounting Standards Codification ("ASC") 210-10-20, cash equivalents are short-term, highly liquid investments that are readily convertible to cash. Only investments with original maturities of three months or less when purchased qualify under that definition. Therefore, the fixed deposits maturing over three months in amount of $62 million as at July 28, 2017 are not classified as cash and cash equivalents but are separately disclosed as short term investments in the balance sheet.

(2)     Capitalization on project investment was $2.5million for July 2017, totaling $7.4 million for seven months ended July 28, 2017and our accumulated project investment was $46.1 million up to July 28, 2017.

(3)     Accumulated other comprehensive loss represented foreign currency translation adjustment.

NAM TAI PROPERTY INC.

CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED JULY 28, 2017

(In Thousands of US dollars)

Unaudited

One month ended July 28,

2017

Unaudited

Seven months ended July 28,

 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated net income

$

474

$

4,373

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

Depreciation and amortization of property, plant and equipment,
   land use rights and other assets

28

187

Loss on disposal of property, plant and equipment

90

49

Share-based compensation expenses

55

658

Unrealized exchange gain

(286)

(2,536)

Changes in current assets and liabilities:

Increase in prepaid expenses and other receivables

(1,060)

(787)

(Decrease) increase in accrued expenses and other payables

(263)

1,172

Total adjustments

(1,436)

(1,257)

Net cash (used in) provided by operating activities

$

(962)

$

3,116

CASH FLOWS FROM INVESTING ACTIVITIES

Payment of real estate properties under development

$

(373)

$

(3,344)

Purchase of property, plant & equipment

(3)

(132)

Decrease (increase) in deposits for real estate properties under development

6

(160)

Increase in deposits for purchase of property, plant and equipment

(39)

(13,422)

Proceeds from disposal of property, plant and equipment

1

68

(Increase) decrease in short term investments

(7,433)

27,511

Net cash (used in) provided by investing activities

$

(7,841)

$

10,521

CASH FLOWS FROM FINANCING ACTIVITIES

Cash dividends paid

$

(2,562)

$

(7,670)

Proceeds from share issued for option exercise

2,008

2,882

Net cash used in financing activities

$

(554)

$

(4,788)

Net (decrease) increase in cash and cash equivalents

$

(9,357)

$

8,849

Cash and cash equivalents at beginning of period

115,985