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.com