Qiao Xing Universal Telephone Announces Key Operating Data for the Second Quarter 2006

Qiao Xing Universal Telephone, Inc.
2006-11-01 12:38 16567

Planned Acquisition of Remaining 20% Equity Interest of Qiao Xing Mobile

Communication, and Positive Sales Momentum for the Week-long National Day

Holidays in China

HUIZHOU, Guangdong, China, Oct. 31 /Xinhua-PRNewswire/--Qiao Xing

Universal Telephone, Inc. (Nasdaq: XING) today Announces Key Operating Data

for the Second Quarter 2006, Planned Acquisition of Remaining 20% Equity

Interest of Qiao Xing Mobile Communication, and Positive Sales Momentum for

the Week-long National Day Holidays in China.

Operating Data

Qiao Xing Universal Telephone’s sales and operating income increased

15.6% and 518% respectively in the second quarter versus the first quarter of

2006. The significant increase in operating income is primarily due to the

lack of stock based compensation in the second quarter. Stripping out stock

option grants, operating income increased 38% primarily on improved gross

profit margins.

1Q 2Q

All figures in millions of US dollars 2006 2006

Net sales 84.1 97.3

Cost of goods sold 70.8 78.8

Gross profit 13.3 18.5

Operating expenses other than share-based

compensation -3.9 -5.5

Share-based compensation -7.3 --

Income from operations 2.1 13.0


In addition to the increase in operating performance, Qiao Xing Universal

Telephone herein announces an acquisition from the minority shareholder the

remaining 20% equity interest of Qiao Xing Mobile Communication, or QXMC, a

British Virgin Islands company that holds a 93.4% interest in the Sino-

foreign joint venture CEC Telecom, or CECT, for $43mn USD, to be paid partly

in cash and partly in shares of Qiao Xing Universal Telephone. The valuation

of QXMC was based on the implied valuations from the convertible debenture

that was completed in June of this year. The acquisition is expected to be

finalized no later than the end of December 2006, and the closing remains

subject to customary closing conditions. Qiao Xing Universal Telephone

arrived at the decision to make this acquisition based on the historical

operating performance of CECT, and also the strategic consideration of

converting QXMC into a 100% subsidiary to streamline the ownership structure

of CECT.

Positive Momentum

Qiao Xing Universal Telephone would like to respond to reports circulated

in the Chinese press surrounding performance leading up to the October 1

Chinese National Day by confirming that, up to October 1, CECT has received

orders from distributors for about USD85mn for its recently-launched

“A1000” and “IP1000” series of mobile phones.

According to a recent Sino Report, CECT’s market share is tenth among

all mobile phone brands and fourth among local brands in China. Despite

relatively higher selling prices than most local brands, Qiao Xing Universal

Telephone believes that this upward momentum of market share ranking is

driven in part by the flexibility to offer differentiated products.

Other Updates

A financing solution reached with DKR Management via an issuance of $24mn

USD in stock and 26mn USD in a convertible provided Funds for the acquisition

of the 20% minority interest in QXMC. Terms were finalized on September

18th, and consist of 2 million shares placed at $12 and a CB with a

conversion price of $14.30.

In accordance with Nasdaq listing rules, a consolidated income statement

for the first half of 2006 and an interim balance sheet shall be filed by

December 31, 2006.

Forward-looking statements

This press release may contain 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 assumptions or judgments concerning such

performance. 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

has grown its net sales from approximately $46.4 million in 1997 to $356

million in 2005. 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, including MP3 players, cash registers and set-top-box products.

This includes the world’s first model of dual mode and dual call waiting

GSM/CDMA smartphone, the ‘CECT CoolPAD 728’, and a model of multi-media PDA

phone that enjoys 1000 hours stand by time, the ‘A100’. The Company has

established co-operative 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 .

Source: Qiao Xing Universal Telephone, Inc.