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
Acquisition
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 http://www.cosun-xing.com .