HUIZHOU, Guangdong, China, July 16 /PRNewswire-Asia-FirstCall/ -- Qiao Xing Universal Telephone, Inc. (Nasdaq: XING) today announced its Fiscal Year 2008 financial results and the filing of its 2008 Annual Report on Form 20-F.
Primarily due to the global economic downturn and the earthquake that took place in the Sichuan province of China in May 2008, our net sales revenue declined from Rmb3,874.1 million for the fiscal year 2007 to Rmb2,594.9 million (US$380.4 million) for the fiscal year 2008. However, our comprehensive gross margin increased from 25.2% in 2007 to 33.8% in 2008. As a result, our gross profit decreased from Rmb975.1 million in 2007 to Rmb875.9 million (US$128.4 million) in 2008, representing a decrease of 10.2%.
Our major subsidiary, Qiao Xing Mobile Communication Co., Ltd ("QXMC"), a domestic manufacturer of mobile phone handsets in China, strategically shifted its products portfolio to target upper-middle-income consumers, especially young professionals, and significantly increased its gross margins from 28.2% in 2007 to 40.2% in 2008.
For our COSUN-branded mobile phone business, the global economic recession, as well as intensive competition in the Chinese mobile phone markets (including competition from copy-catting handset producers which produce and distribute copied handsets that have no network access permits and pay no tax), created a substantial loss for our operation in 2008. We reported a decrease of 61.7% in net sales revenues and a gross loss of Rmb20.3 million (US$3.0million) for this business segment (compared with a gross profit of Rmb60.0 million in 2007). For the indoor phone business, net sales revenues for 2008 were Rmb252.2 million (US$37.0 million), representing an increase of 6.1% from 2007. The increase was primarily attributable to the big volume orders received from an overseas telecommunication operator under an agreement signed in 2007. However, the gross margin from the indoor phones decreased from 13.2% in 2007 to 11.6% in 2008 due to the global financial crisis and the appreciation of the Renminbi.
For the fiscal year 2008, QXMC reported a net income of Rmb423.8 million (US$62.1million) and basic earnings per share after extraordinary gains of Rmb7.52 (US$1.10). Among the Rmb423.8 million (US$62.1million) net income in QXMC, Rmb161.8 million (US$23.7 million) was pertaining to minority interest when computing the Company’s share in QXMC’s net results. Qiao Xing Communication Holdings Limited ("QXCH"), another subsidiary of the Company engaged in the lower-end mobile phone handset business and indoor phone business, reported a net loss of Rmb291.0 million (US$42.7 million) for 2008, which was primarily due to the economic recession, and dramatically increased provisions for doubtful debts on accounts receivable in the amount of Rmb232.8 million (US$34.1 million) (compared with Rmb3.0 million in fiscal year 2007).
The material loss from QXCH, as well as significant interest expenses equal to Rmb146.2 million (US$21.4 million) related to the convertible bonds outstanding in 2008 at the Qiao Xing Universal Telephone, Inc. company level, which consisted mainly of non-cash interest expense equal to Rmb131.6 million (US$19.3 million) and cash expense of Rmb14.6 million (US$2.1 million), led to a net loss of Rmb136.8 million (US$20.0 million) for the Company in 2008 and a basic loss per share after extraordinary gain of Rmb4.42 (US$0.65).
Outlook
We think our QXMC subsidiary will continue to capture market opportunities in the growth of 3G-related products and that it will continue its success by the launch of more luxury high-end mobile phone handset under its VEVA brand.
We expect that in the first half of 2009, QXCH’s operations will not be likely to turn around to positive and we may consider the possibility of disposing of our lower-end mobile phone and indoor phone businesses from the Group.
The Company is continuing its diversification strategy smoothly. We anticipate that our molybdenum business will generate substantial revenues, income and cash flow to the Group starting from the second half of 2009.
The Company’s 2008 Annual Report on Form 20-F
The Company filed its annual report on Form 20-F for the fiscal year ended December 31, 2008 with the Securities and Exchange Commission on July 15, 2009. The annual report can be accessed on the Company’s investor relations website at http://www.cosun-xing.com .
We will provide a hard copy of the annual report on Form 20-F for the fiscal year ended December 31, 2008, which contains our audited consolidated financial statements, free of charge, to our shareholders upon request. Requests should be directed in writing to:
Qiao Xing Universal Telephone, Inc
Qiao Xing Industrial Zone, Tang Quan,
Huizhou, Guangdong, PRC
Postcode: 516023
Conference Call Information
The Company will hold a conference call on Friday, July 17, 2009 at 8:00am EDT (8:00 pm Beijing Time). The subject of the conference call will be "2008 Business Review and Outlook".
The dial-in details for the live conference call are as follows:
International Access Number: +852 3005 2050
Hong Kong Access Number: 3005 2050
US Toll Free Access Number: 1866 549 1292
Participant PIN Code: 435809#
Please dial in approximately 10 minutes before the scheduled time of the call.
A live and archived webcast of the conference call will be available on http://www.cosun-xing.com .
Appendix
QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2008
2 0 0 7 2 0 0 8
RMB’000 RMB’000 US$’000
ASSETS
Current assets:
Cash and cash equivalents 3,033,010 3,117,527 456,948
Restricted cash 197,951 263,800 38,666
Accounts receivable, net
(includes net amount
receivable from a related
party of RMB179,935,000
(2007: RMB97,070,000)) 941,518 934,107 136,916
Bills receivable 115,261 202,174 29,633
Inventories 304,024 241,310 35,370
Prepaid expenses 273,881 497,766 72,959
Other current assets 1,111,408 609,233 89,298
Due from related parties 27 25 4
Deferred income taxes 13,350 6,994 1,025
Deferred debt issuance costs, net 14,579 34,689 5,084
Total current assets 6,005,009 5,907,625 865,903
Property, machinery and equipment,
net 192,601 183,137 26,843
Land use rights, net 36,106 35,304 5,175
Investment at cost 7,803 7,802 1,144
Goodwill 76,594 82,059 12,028
Other non-current assets -- 111,786 16,384
Other acquired intangible assets,
net 60,728 22,766 3,337
Total assets 6,378,841 6,350,479 930,814
LIABILITIES, MINORITY INTERESTS
AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term bank borrowings 1,471,454 1,500,855 219,986
Accounts payable 180,573 112,957 16,557
Other payables 42,009 14,124 2,070
Accrued liabilities 104,984 87,763 12,864
Deposits received 4,539 3,236 474
Deferred revenues 26,402 58,560 8,583
Due to related parties 608 905 133
Taxation payable 73,301 64,238 9,416
Embedded derivative liability 19,004 127,080 18,627
Convertible notes 135,667 383,596 56,225
Total current liabilities 2,058,541 2,353,314 344,935
Convertible notes 189,660 -- --
Shareholders’ loans 7,194 6,729 986
Deferred income taxes 5,561 320 46
Total liabilities 2,260,956 2,360,363 345,967
Minority interests 1,095,917 1,008,786 147,862
Commitments and contingencies
Shareholders’ equity:
Common stock, par value
RMB0.008 (equivalent of
US$0.001); authorized
50,000,000 shares;
outstanding and fully paid
- 30,948,836 as of December 31,
2007 and 2008 251 251 37
Additional paid-in capital 1,737,541 1,867,512 273,728
Retained earnings 1,325,984 1,189,190 174,304
Cumulative translation adjustments (41,808) (75,623) (11,084)
Total shareholders’ equity 3,021,968 2,981,330 436,985
Total liabilities, minority
interests and
shareholders’ equity 6,378,841 6,350,479 930,814
QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)FOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
2 0 0 6 2 0 0 7 2 0 0 8
RMB’000 RMB’000 RMB’000 US$’000
Net sales 3,221,212 3,874,107 2,594,948 380,352
Cost of goods sold (2,651,392) (2,898,964) (1,719,024) (251,964)
Gross profit 569,820 975,143 875,924 128,388
Operating expenses:
Selling expenses (28,401) (59,820) (156,985) (23,010)
General and
administrative
expenses (126,076) (131,074) (338,751) (49,652)
Research and development (30,747) (34,452) (44,000) (6,449)
In process research and
development (41,739) -- -- --
Amortization of
acquired intangible
assets (15,178) (32,280) (11,727) (1,719)
Impairment of
acquired intangible
assets -- -- (26,235) (3,845)
Income from operations 327,679 717,517 298,226 43,713
Interest income 8,108 42,127 71,026 10,411
Exchange (loss) gain,
net 3,225 28,255 (5,355) (785)
Interest expense (100,432) (248,014) (341,624) (50,073)
(Loss) gain on
remeasurement of
embedded
derivatives (134,439) (129,084) 160,036 23,457
Loss on extinguishment
of convertible debts -- (142,090) (10,634) (1,559)
Gain on disposal of
interests
in subsidiaries -- 482,614 2,269 333
Gain on
issue/repurchase of
stocks by
subsidiary -- 383,965 4,351 638
Provision for
litigation settlement -- (15,319) -- --
Other income (loss), net 4,453 59,055 (6,497) (952)
Income before income
tax 108,594 1,179,026 171,798 25,183
Provision for income tax (58,192) (124,120) (164,187) (24,066)
Income before minority
interests 50,402 1,054,906 7,611 1,117
Minority interests (84,473) (168,554) (144,405) (21,166)
Net income (loss)
before extraordinary
items (34,071) 886,352 (136,794) (20,049)
Extraordinary items:
Gains on acquisitions
of minority interests,
net of nil tax 14,237 17,596 -- --
Net income (loss) (19,834) 903,948 (136,794) (20,049)
Other comprehensive
income (loss) -
Translation adjustments 7,203 (50,106) (33,815) (4,956)
Comprehensive income
(loss) (12,631) 853,842 (170,609) (25,005)
Basic earnings (loss)
per common share:
Before extraordinary RMB RMB RMB US$
gain (1.44) 24.46 (4.42) (0.65)
Extraordinary gain RMB RMB RMB US$
0.60 0.49 -- --
After extraordinary RMB RMB RMB US$
gain (0.84) 24.95 (4.42) (0.65)
Diluted earnings (loss)
per common share:
Before extraordinary RMB RMB RMB US$
gain (2.03) 24.17 (5.89) (0.86)
Extraordinary gain RMB RMB RMB US$
0.59 0.48 -- --
After extraordinary RMB RMB RMB US$
gain (1.44) 24.65 (5.89) (0.86)
Weighted average number
of shares outstanding
Basic 23,712,000 29,836,000 30,949,000 30,949,000
Diluted 24,016,000 30,200,000 30,949,000 30,949,000
QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2006, 2007 AND 2008
2 0 0 6 2 0 0 7 2 0 0 8
RMB’000 RMB’000 RMB’000 US$’000
Cash flows from operating
activities:
Net income (loss) (19,834) 903,948 (136,794) (20,049)
Adjustments to reconcile
net income (loss) to net
cash flows from operating
activities -
Depreciation of property,
machinery and equipment 11,124 17,023 16,741 2,454
Amortization of land use
right 4,130 4,539 803 118
Bad debt expense 2,116 2,961 232,841 34,128
Amortization of other
acquired intangible assets 15,178 32,280 11,727 1,719
In process research and
development 41,739 -- -- --
Stock-based compensation 58,707 38,626 14,669 2,150
Foreign exchange loss (gain) (3,225) (27,447) 5,355 785
Interest expense on
shareholders’ loans 459 487 437 64
Amortization of deferred
debt issuance costs 11,339 37,321 24,738 3,626
Accretion of convertible
note discounts 36,880 140,251 188,201 27,585
Loss (gain) on
remeasurement of embedded
derivatives 134,439 129,084 (160,036) (23,457)
Loss on extinguishment of
convertible debts -- 142,090 10,634 1,559
Gain on disposal of
interests in subsidiaries -- (482,614) (2,269) (333)
Gain on sale/repurchase of stocks
by subsidiary -- (383,965) (4,351) (638)
Provision for litigation
settlement -- 15,319 -- --
Net loss (gain) on disposal
of property,
machinery and equipment 8 99 (11) (2)
Net gain on disposal of
land use rights and
construction-in-progress -- (58,199) -- --
Deferred income tax (8,003) (11,938) 1,115 163
Minority interests 84,473 168,554 144,404 21,166
Extraordinary gains on
acquisitions of minority
interests (14,237) (17,596) -- --
Impairment of acquired
intangible assets -- -- 26,235 3,845
Changes in operating assets
and liabilities -
Accounts receivable (185,469) (104,834) (225,430) (33,042)
Bills receivable (2,736) 306,386 (86,913) (12,739)
Inventories 2,418 (71,166) 62,714 9,192
Prepaid expenses (155,906) 167,402 (223,885) (32,816)
Other current assets 9,273 (19,081) (55,912) (8,195)
Accounts payable (112,141) (45,066) (67,616) (9,911)
Other payables (1,286) (1,907) (4,857) (712)
Accrued liabilities 3,074 31,552 (17,220) (2,524)
Deposits received (8,693) 2,503 (1,304) (191)
Deferred revenues (38,053) 11,013 32,158 4,713
Taxation payable (22,614) 27,029 (9,063) (1,328)
Net cash provided by (used
in) operating activities (156,840) 954,654 (222,889) (32,670)
Cash flows from investing
activities:
Acquisitions of property,
machinery and equipment (168,461) (8,017) (14,225) (2,085)
Acquisition of land use
right (39,004) -- -- --
Expenditures on
construction-in-progress (1,190) -- -- --
Net cash outflow on
disposal of subsidiaries
by QXMC -- -- (1,162) (170)
Net cash outflow from
acquisition of minority
interests (170,343) -- -- --
Proceeds from disposal of
property, machinery and
equipment 241 209 12,900 1,890
Proceeds from disposal of
land use rights and
construction-in-progress -- 180,000 -- --
Interest-bearing advances
to a third party -- (998,331) -- --
Refund of interest-bearing
advances -- -- 408,658 59,899
(Increase) decrease in
restricted cash (224,252) 175,822 (65,849) (9,652)
Net cash provided by (used
in) investing activities (603,009) (650,317) 340,322 49,882
Cash flows from financing
activities:
Increase in short-term
borrowings 403,991 323,182 2,611,586 382,790
Repayment of short-term
borrowings -- -- (2,577,399) (377,779)
Net proceeds from issuance
of convertible notes 482,041 175,088 125,722 18,428
Net proceeds from exercise
of options and warrants 259,637 30,911 -- --
Repayment of convertible
notes -- -- (171,763) (25,176)
Net proceeds from issuance
of common stock by the
Company 317,900 114,534 -- --
Net proceeds from IPO of
common stock by a
subsidiary -- 1,026,610 -- --
Capital contributed by
minority shareholders of a
subsidiary -- 2,100 -- --
Net advances from related
parties 2,088 3,495 297 44
Net cash provided (used) by
financing activities 1,465,657 1,675,920 (11,557) (1,693)
Effect of translation
adjustments (991) (43,724) (21,359) (3,130)
Net increase in cash and
cash equivalents 704,817 1,936,533 84,517 12,389
Cash and cash equivalents,
beginning of year 391,660 1,096,477 3,033,010 444,559
Cash and cash equivalents,
end of year 1,096,477 3,033,010 3,117,527 456,948
Supplemental disclosure of
cash flow information:
Interest paid 50,374 60,459 115,696 16,958
Income tax paid 63,383 103,834 162,527 23,822
Non-cash investing and
financing activities:
- Consideration for
acquisition of equity
interest in
a subsidiary paid in the
form of common stocks 185,721 -- -- --
- Consideration for
extinguishment of
convertible
notes liability paid in the
form of common stocks
of a subsidiary -- 721,188 -- --
- Stock issuance costs
paid in the form of
share-based payment 48,631 8,183 -- --
- Subsidiary repurchased
ordinary shares through
the issuance of convertible
notes -- -- 338,165 49,566
- Subsidiary issued
ordinary shares on
partial conversion of
convertible notes -- -- 55,054 8,070
- Warrant issuance costs
paid in the form of
share-based payment 1,936 769 2,500 366
- Convertible note
issuance costs paid in
the form of share-based
payment 28,796 9,891 31,451 4,610
About Qiao Xing Universal Telephone, Inc.
Qiao Xing Universal Telephone, Inc. is one of China’s largest manufacturers and distributors of telecommunications products in China. QXUT’s product portfolio includes telecommunications terminals and related products, including fixed wireless phones, VoIP telephones, mobile handsets, PDAs and consumer electronic products, including MP3 players, cash registers and set- top-box products. The Company primarily conducts its business through its operating subsidiaries CEC Telecom Co., Ltd (CECT), and Huizhou Qiao Xing Communication Industry Co., Ltd (HZQXCI), a company engaged in R&D and distribution of indoor telephone sets and economy mobile phones under the COSUN brand. The Company Group 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. During 2009, the Company has acquired the 100% equity interest in China Luxuriance Jade Company, Ltd and now has begun to diversify into the resource industry.
For more details, please visit http://www.cosun-xing.com .
Safe Harbor Statement
This announcement contains forward-looking statements, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, these forward-looking statements can be identified by words or phrases such as "aim," "anticipate," "believe," "continue," "estimate," "expect," "intend," "is /are likely to," "may," "plan," "potential," "will" or other similar expressions. Statements that are not historical facts, including statements about Qiao Xing Universal’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward- looking statement. Information regarding these factors is included in our filings with the Securities and Exchange Commission. Qiao Xing Universal does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release is as of July 16, 2009.
For more information, please contact:
Rick Xiao
Tel: +86-752-2820268
Email: Rickxiao@qiaoxing.com
