Qiao Xing Universal Telephone, Inc. Releases Its Income Statement for the Three Months Ended September 30, Balance Sheet as at June 30, 2006 and Income Statement for the Six Months Ended June 30, 2006, and Provides an Update on an Acquisition |
HUIZHOU, Guangdong, China, Dec. 22 /Xinhua-PRNewswire/ -- Qiao Xing Universal Telephone, Inc. (Nasdaq: XING) releases today its Un-audited Income Statement for the Three Months Ended September 30, Un-audited Balance Sheet as at June 30, 2006 and Income Statement for the Six Months Ended June 30, 2006, and provides an update on the acquisition of the remaining 20% equity in Qiao Xing Mobile Communication Co., Ltd. Un-audited Income Statement for the Three Months Ended September 30 For the third quarter of 2006, XING's sales revenue, income from operations and net income all increased significantly to reach USD107.7 Million, USD21.0 Million and USD13.2 Million respectively. The significant growth was primarily driven by the popularity of the "CECT" branded 'A1000' and 'IP1000' Models and the increasing brand recognition and the expanding distribution network of its 'COSUN' branded mobile phones business. The Basic earnings per common share after extraordinary gain for the third quarter was USD56 cents. The Un-audited Income Statement for the Three Months Ended September 30 can be found in Appendix I below Un-audited Balance Sheet as at June 30, 2006 and Income Statement for the Six Months Ended June 30, 2006 For the six months ended June 30, 2006, the company recorded USD177.5 million, USD15.4million and USD12.5 million for its Net sales, Income from operations and net income before option charge respectively. In the first half of 2006, the Company granted to certain employees and an external consultant stock options to purchase all the 2,000,000 shares of common stock authorized and reserved for issuance under the Stock Compensation Plan set up in 2005. Mr. Wu Rui Lin, Chairman of XING, said, "The granting of stock options, though representing an expense in the income statement and having a dilutive effect on earnings, has the advantage of not involving any outflow of cash. In fact, for some senior employees, the lion's share of their total remuneration package is in stock options. The share-based compensation recorded for 2006 H1 related to the 2005 Plan, and was for services rendered over a long period of time. "There are many different approaches to the treatment of options. The Black-Scholes Model has been used for the income statement for the six months ended June 30, 2006 of XING presented in this press release. RMB 58.4 million (USD 7.3 million) of share-based compensation expenses has been recorded as a result. "However, as all the options to purchase 2,000,000 shares were exercised within a very short period of time (less than two months) of their grant, a case can be made for using the intrinsic value method for compensation cost measurement. Intrinsic value is the excess of the market price of the underlying stock over the exercise price of a related stock option. "Using the Black-Scholes Model, the net income was $5.2 million. Using the intrinsic value approach, the net income would have been $ 12.5 million instead. No matter which approach to use, it has no impact on the cash flow situation of the company." For nine months ended September 30, 2006, the company recorded net sales of US$285.2 million and income from operation of US$36.3 million. Net income and basic earnings per share were US$18.4 million and USD 80 cents respectively using the Black-Scholes Model. If the intrinsic value method had been used, they respectively would have been US$25.7 million and USD1.13 instead. The un-audited consolidated balance sheet as at June 30, 2006 and the un- audited consolidated income statement for the six months ended June 30, 2006 can be found in Appendix II below Other Event In November, the Company completed the acquisition from the minority shareholder of the remaining 20% equity in Qiao Xing Mobile Communication Co., Ltd, an investment holding company that owns 93.4% of the equity interests in the mobile phone handset maker CEC Telecom Co., Ltd. (CECT). As a result, Qiao Xing Universal's effective shareholding in CECT has increased from 74.7% to 93.4%. On a pro forma basis assuming that the transaction had taken place on January 1, 2006, it would increase the net income of the company for the nine months ended September 30, 2006 to USD 24.8 million using the Black-Scholes Model for the measurement of stock-based compensation cost. If the intrinsic value method had been used, it would have been USD 32.1 million instead. Appendix I QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND NET INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 2006 Q3 Rmb'000 US$'000 (Un-audited) (Un-audited) Net sales 851,236 107,697 Cost of goods sold (659,771) (83,473) Gross profit 191,465 24,224 Operating expenses: Selling expenses (8,826) (1,117) General, administrative and R&D expenses (14,465) (1,830) Amortization of acquired intangible assets (2,405) (304) Income from operations 165,769 20,973 Interest expense, net (12,880) (1,630) Exchange gain, net 4,425 560 Amortization of discount on bonds (9,489) (1,201) Other expenses, net (249) (32) Income before income tax 147,576 18,671 Provision for income tax (23,804) (3,012) Income before minority interests 123,771 15,659 Minority interests (34,219) (4,329) Net income before extraordinary item 89,552 11,330 Extraordinary item - gain on acquisition of additional equity interest in a subsidiary 14,398 1,822 Net income 103,950 13,152 Basic earnings per common share Before extraordinary gain Rmb US$ 3.74 0.48 Extraordinary gain Rmb US$ 0.61 0.08 After extraordinary gain Rmb US$ 4.35 0.56 Diluted earnings per common share Before extraordinary gain Rmb US$ 3.39 0.43 Extraordinary gain Rmb US$ 0.48 0.06 After extraordinary gain Rmb US$ 3.87 0.49 Weighted average number of shares outstanding - Basic 23,707,000 23,707,000 - Diluted 29,726,000 29,726,000 Appendix II QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2006 June 30, 2006 Rmb'000 US$'000 (Un-audited) (Un-audited) ASSETS Current assets: Cash and cash equivalents 579,528 72,493 Restricted cash 195,109 24,406 Accounts and bills receivable 891,381 111,503 Inventories 211,037 26,398 Prepayments and other current assets 641,449 80,238 Total current assets 2,518,504 315,038 Property, plant and equipment 292,372 36,573 Prepayment for purchase of property, plant and equipment 358,742 44,875 Other non-current assets 9,046 1,132 Investments at cost 7,634 955 Goodwill 72,088 9,017 Other acquired intangible assets, net 43,418 5,431 Discount on bonds 57,139 7,147 Total assets 3,358,943 420,168 LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings 920,880 115,192 Accounts payable 212,100 26,531 Accrued liabilities 79,637 9,962 Deposits received, deferred revenues and other current liabilities 114,216 14,287 Total current liabilities 1,326,833 165,972 Shareholders' loans 7,885 986 Bonds 319,772 40,000 Total liabilities 1,654,490 206,958 Minority interests 270,001 33,774 Shareholders' equity: Common stock, par value Rmb0.008 (equivalent of US$0.001); authorized 50,000,000 shares; outstanding and fully paid - 23,651,692 as of June 30, 2006 195 24 Additional paid-in capital 907,768 113,552 Retained earnings 525,267 65,705 Cumulative translation adjustments 1,224 153 Total shareholders' equity 1,434,454 179,434 Total liabilities, minority interests and shareholders' equity 3,358,945 420,166 QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND NET INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2006 2006 First half Rmb'000 US$'000 (Un-audited) (Un-audited) Net sales 1,419,316 177,541 Cost of goods sold (1,165,215) (145,756) Gross profit 254,101 31,785 Operating expenses: Selling expenses (22,438) (2,807) General and administrative expenses including stock-based compensation (91,241) (11,413) Research and development (12,754) (1,595) Amortization of acquired intangible assets (4,809) (602) Income from operations 122,859 15,368 Interest income 3,412 427 Exchange gain, net 473 59 Interest expense (23,890) (2,988) Amortization of discount on bonds (1,736) (217) Other income, net 2,865 358 Income before income tax 103,983 13,007 Provision for income tax (23,329) (2,918) Income before minority interests 80,654 10,089 Minority interests (38,800) (4,853) Net income 41,854 5,236 Earnings per common share - Basic Rmb US$ 1.89 0.24 - Diluted Rmb US$ 1.83 0.23 Weighted average number of shares outstanding - Basic 22,175,000 22,175,000 - Diluted 22,834,000 22,834,000 Forward-looking statements This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements present management's expectations, beliefs, plans and objectives regarding future financial performance and are subject to change. Any discussions contained in this press release, except to the extent that they contain historical facts, are forward-looking and accordingly involve estimates, assumptions, judgments and uncertainties. There are a number of factors that could cause actual results or outcomes to differ materially from those addressed in the forward- looking statements. Such factors are detailed in the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2005 and subsequent reports filed with the Securities and Exchange Commission. About Qiao Xing Universal Telephone, Inc. Qiao Xing Universal Telephone, Inc. is one of China's largest manufacturers and distributors of telecommunications products. The Company conducts is operations primarily through two subsidiaries: CEC Telecom Co., Ltd. ("CECT"), its primary subsidiary, and Huizhou Qiao Xing Communication Industry, Limited ("HZQXCI"). CECT sells "CECT" branded cell phones and HZQXCI sell indoor phones and "Cosun" branded mobile phones. The Company's product portfolio includes telecommunications terminals and related products, including fixed wireless phones, VoIP telephones, advanced mobile phones, PDAs and consumer electronic products. This includes a model of PDA phone that combined ultra-small design and handwriting function, the 'T868', and a model of multi-media PDA phone that enjoys 1000 hours stand by time, the 'A1000'. The Company has established relationships with leading telecom and software companies for their China strategy, including Microsoft and Palm, aiding success for its 'High End Mobile Phone Strategy'. XING has launched more than 120 models of mobile phones and has established more than 250 wholesales outlets and more than 350 after sales service centres in 31 provinces and municipalities. In indoor business area, XING currently distributes over 300 models of corded and cordless telephones and is one of China's largest distributors of indoor phones. For its indoor phone segment, the Company has built a strong distribution network comprised of more than 5,000 retail stores throughout China and has established partnerships with major retailers in Europe, North America and Latin America, including Bellsouth and Wal-mart. For more details, please visit http://www.cosun-xing.com . For more information, please contact: Rick Xiao Qiao Xing Universal Telephone, Inc. Tel: +86-752-282-0268 Email: rick@qiaoxing.comSOURCE Qiao Xing Universal Telephone, Inc.
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CONTACT:
Rick Xiao, Qiao Xing Universal Telephone,
Inc., +86-752-282-0268, or rick@qiaoxing.com
