HUIZHOU, Guangdong, China, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- Qiao Xing Universal Telephone, Inc. (Nasdaq: XING) today released its consolidated income statement for the six months ended June 30, 2007 and consolidated balance sheet as at June 30, 2007.
Highlights for the First Half of 2007
Compared to the same period last year, net sales, gross profit and income from operations increased respectively 30.9%, 95.4% and 199.6% to reach RMB1,857.6 million (USD 244.0 million), RMB 496.4 million (USD 65.2 million) and RMB 368.1 million (USD 48.4 million) for the first half of 2007.
Gross margin and operating margin increased respectively from 17.9% and 8.7% of revenues for the first half of 2006 to 26.7% and 19.8% for the same period this year.
Basic earnings per share of common stock before and after extraordinary gain was RMB 21.53 (USD 2.83) and RMB 22.03 (USD 2.89) respectively.
Basic earnings per share of common stock would have been RMB 7.06 (USD 0.93), had certain non-cash income and expenses, which, in management's opinion, may not be indicative of the Company's core business operating results, been excluded.
"We had a strong first half of 2007, as all key indicators of financial performance, including gross margin, operating margin and basic earnings per share of common stock, show," said Mr. Wu Rui Lin, Chairman of XING, "Supported by our powerful research and development capabilities, our efforts in innovation have resulted in the launch of a series of differentiated products of relatively high gross margins. We have adopted alternative sales channels including TV direct sales, which help us to compete effectively with our rivals in an increasingly competitive environment in China. We remain confident in our long-term prospects as one of the leading domestic telecommunication terminal players in China and firmly believe in our ability to continuously launch new and differentiated products that will satisfy the needs of consumers in specific market segments."
Financial Review of Operations for the First Half of 2007
Compared to the first half of 2006, net sales increased 30.9% to reach RMB1,857.6 million (USD 244.0 million) for the same period this year. The growth was attributable to the sale of CECT-branded mobile phone handsets. For COSUN-branded mobile phone business, the Company recently completed the transition of product portfolio from full range to lower-end, with necessary adjustments in research and development and distribution channels, which has laid a solid foundation for growth in the second half of 2007 and for the years to come.
Revenues from the sale of CECT-branded mobile phone handsets were RMB 1,549.6 million (USD 203.6 million) in the first half of 2007, an increase of 41.6% compared to the same period a year earlier, primarily due to higher handset shipments.
CECT-branded handset shipments in the first half of 2007 were 1,808,000 units, an increase of 76.0% compared to the same period a year earlier. The growth was primarily driven by the popularity of the CECT-branded ultra-long standby handset models. These ultra-long standby handsets can last up to 2 months in standby mode without a recharge. Additionally, the distribution channel of CECT-branded handsets was effectively broadened towards the end of 2006 when infomercials were first used to market and sell handsets directly to consumers.
Compared to the first half of 2006, gross profit increased 95.4% to reach RMB 496.4 million (USD 65.2 million) for the same period this year. Gross margin increased from 17.9% of revenues for the first half of 2006 to 26.7% for the same period this year. The increase in gross profit and the improvement in gross margin were attributable to the gross profit contribution from the sale of CECT-branded mobile phone handsets.
Gross profit from the sale of CECT-branded mobile phone handsets were RMB 445.9 million (USD 58.6 million) in the first half of 2007, an increase of 128.6% compared to the same period a year earlier. Gross margin increased from 17.8% of revenues for the first half of 2006 to 28.8% for the same period this year. The increase in gross profit and the improvement in gross margin were primarily due to the increase in sales of higher-margin CECT-branded handset products. In addition, the sale of the new CECT-branded C2000 model handsets through a new TV infomercial arrangement also contributed to the increase in gross profit. Under this new arrangement, the handsets are sold to the infomercial company at a higher price, but in return, the seller bears the airtime and logistics costs.
Net income after extraordinary gain was arrived at after crediting/charging certain non-cash income/expenses listed in the chart below with their amounts, which, in management's opinion, may not be indicative of the Company's core business operating results.
Account
classification 2007 first half 2007 first half
Un-audited Un-audited
RMB ‘000 USD ‘000
Net gain on Non-operating income
conversion of
XING convertible
notes by note
holders to shares
of a subsidiary 339,000 44,535
Gain on deemed Non-operating income
disposal of a
subsidiary
through
IPO 394,744 51,858
Share-based Operating expenses
compensation
expenses (Group's
share after
related
minority
interests) -12,000 -1,576
Amortization of Operating expenses
acquired
intangible assets
(Group's share
after related
minority
interests) -17,943 -2,358
Non-cash interest Non-operating expenses
expenses -89,784 -11,795
Loss on Non-operating expenses
re-measurement
of embedded
derivatives -95,242 -12,512
Extraordinary Extraordinary gain
gain on
acquisition of
minority
interests
in a sub-subsidiary
by a subsidiary 17,586 2,310
Total, net 536,361 70,462
Had the above non-cash income and expenses been excluded, net income after extraordinary gain would have been RMB 253.2 million (USD 33.3 million) instead of RMB 789.5 million (USD 103.7 million), and basic earnings per share of common stock would have been RMB 7.06 (USD 0.93) instead of RMB 22.03 (USD 2.89) for the six months ended June 30, 2007.
Outlook
We estimate that for the second half of 2007, the shipment volume of mobile phone handsets would increase over 80%, and gross margin for the mobile phone business segment would improve significantly, compared to the same period of 2006. The volume of shipment of our COSUN-branded mobile phone handsets, which primarily target lower-end market, is expected to start a climb in the second half, owing to significant improvements made in research and development, distribution channels and after-sales service. As for our CECT- branded mobile phone business, it is expected to remain robust in the foreseeable future with continuous launches of creative and differentiated mobile phone handsets.
About Qiao Xing Universal Telephone, Inc.
Qiao Xing Universal Telephone, Inc. is one of China's largest manufacturers and distributor 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. 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 November 14, 2007, and Qiao Xing Universal undertakes no duty to update such information, except as required under applicable law.
Condensed Consolidated Income Statement for the First Half of 2007
2007 first half 2007 first half
Un-audited Un-audited
RMB ‘000 USD ‘000
Net sales 1,857,591 244,035
Cost of goods sold -1,361,187 -178,821
Gross profit 496,404 65,213
Gross margin 26.7 % 26.7 %
Operating expenses -128,277 -16,852
Income from operations 368,126 48,361
Operating margin 19.8 % 19.8 %
Non-operating income less
expenses 523,959 68,833
Income before income tax and 892,086
minority interests 117,195
Income tax expense -55,887 -7,342
Income before minority
interests 836,198 109,853
Minority interests -64,262 -8,442
Net income before
extraordinary gain 771,937 101,411
Extraordinary gain 17,586 2,310
Net income after
extraordinary gain 789,523 103,721
Distributed and
undistributed earnings
before extraordinary gain
Distributed earnings before
extraordinary gain -- --
Undistributed earnings
before extraordinary gain 771,937 101,411
Total earnings before
extraordinary gain 771,937 101,411
Allocation of undistributed
earnings before extraordinary gain
To participatory convertible
notes 133,702 17,565
To common stock 638,235 83,846
Total undistributed earnings
before extraordinary gain 771,937 101,411
Basic earnings per share of
common stock before extraordinary
gain
Distributed earnings -- --
Undistributed earnings RMB 21.53 USD 2.83
Total basic earnings per
share of common stock before
extraordinary gain RMB 21.53 USD 2.83
Distributed and
undistributed earnings
after extraordinary gain
Distributed earnings -- --
Undistributed earnings 789,523 103,721
Total earnings after
extraordinary gain 789,523 103,721
Allocation of undistributed
earnings after extraordinary gain
To participatory convertible
notes 136,748 17,965
To common stock 652,776 85,756
Total undistributed earnings
after extraordinary gain 789,523 103,721
Basic earnings per share of
common stock after extraordinary
gain
Distributed earnings -- --
Undistributed earnings RMB 22.03 USD 2.89
Total basic earnings per
share of common stock after
extraordinary gain RMB 22.03 USD 2.89
Diluted earnings per share
of common stock
Before extraordinary gain N/A N/A
Extraordinary gain N/A N/A
After extraordinary gain N/A N/A
Weighted average number of
shares outstanding -- basic 29,638,000 29,638,000
Weighted average number of
shares outstanding -- diluted N/A N/A
QIAO XING UNIVERSAL TELEPHONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2007
June 30, 2007
Rmb'000 US$'000
(Un-audited) (Un-audited)
ASSETS
Current assets:
Cash and cash equivalents 1,988,281 261,204
Restricted cash 442,274 58,102
Accounts and bills receivable 1,690,304 222,058
Inventories 329,582 43,298
Prepayments and other receivables 713,120 93,684
Deferred income tax assets 7,015 922
Total current assets 5,170,576 679,268
Property, plant and equipment 461,907 60,681
Other non-current assets 9,320 1,224
Investments at cost 7,802 1,025
Goodwill 110,134 14,468
Other acquired intangible assets,
net 73,427 9,646
Total assets 5,833,166 766,312
LIABILITIES, MINORITY
INTERESTS
AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 1,435,545 188,590
Accounts payable 265,235 34,844
Deposits received, deferred
revenues, accrued liabilities and
other current liabilities 250,048 32,849
Embedded derivative liability 63,775 8,378
Bonds 126,880 16,668
Total current liabilities 2,141,483 281,329
Shareholders' loans 7,508 986
Deferred income tax liability 7,239 951
Total liabilities 2,156,230 283,266
Minority interests 1,002,503 131,700
Shareholders' equity:
Common stock, par value Rmb0.008
(equivalent of US$0.001);
authorized 50,000,000 shares;
outstanding and fully paid -
29,648,836 as of June 30, 2007 226 30
Additional paid-in capital 1,456,804 191,383
Retained earnings 1,211,560 159,164
Cumulative translation
adjustments 5,845 768
Total shareholders' equity 2,674,435 351,345
Total liabilities, minority
interests and shareholders'
equity 5,833,168 766,311
