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Qiao Xing Mobile Communication Co., Ltd. Reports First Half 2011 Financial Results

November 30, 2011

BEIJING, Nov. 30, 2011 /PRNewswire-Asia-FirstCall/ – Qiao Xing Mobile Communication Co., Ltd. (NYSE: QXM) (”QXM” or the “Company”), a domestic manufacturer of mobile handsets in the People’s Republic of China (the “PRC”), today announced its unaudited financial results for the six months ended June 30, 2011.

First Half 2011 Results

  • Revenues were RMB238.6 million (US$36.9 million) compared to RMB324.0 million in the first half of 2010.
  • Handset shipments were 437,000 units compared to 621,000 units in the first half of 2010.
  • Gross margin was a negative 32.5% compared to 3.3% in the first half of 2010.
  • Operating loss was RMB162.4 million (US$25.1 million) compared to RMB85.1 million in the first half of 2010.
  • Net loss attributable to holders of ordinary shares was RMB148.4 million (US$23.0 million) compared to net loss of RMB64.5 million in the first half of 2010.

Revenues for the first half of 2011 were RMB238.6 million (US$36.9 million), compared with RMB324.0 million in the same period of 2010. The decrease was primarily due to a decline in handsets revenue which decreased from RMB319.0 million in the first half of 2010 to RMB151.9 million (US$23.5 million) in the first half of 2011. The decrease in handset revenue was however offset by an increase in revenue from the trading of handset materials and components, which generated sales revenue of RMB83.1 million (US$12.9 million) in the first half of 2011. Minimal revenue from the trading of handset materials and components were recorded in the first half of 2010.

The decrease in handsets revenue from RMB319.0 million in the first half year of 2010 to RMB151.9 million (US$23.5 million) in the first half of 2011 was primarily due to lower handset shipments and a decrease in the average selling price (“ASP”) of products sold in the first half year of 2011.

Total handset shipment in the first half year of 2011 was 437,000 units, compared with 621,000 units in the same period of 2010. The decrease in handset shipments compared to the same period of last year was primarily due to a slow-down in shipments amid intense competition in the PRC handset market and poor reception of new product offerings in the first half of 2011.

The ASP of handset products decreased to RMB347 (US$54) in the first half year of 2011, as compared to RMB513 in the first half year of 2010. The lower ASP compared to the same period last year was primarily due to price reductions to drive sales in an increasingly competitive environment as well as to clear inventories of poorly-received new products that were launched in the first half of 2011.

Gross loss in the first half of 2011 was RMB77.6 million (US$12.0 million), compared with a gross profit of RMB10.9 million in the same period of 2010. Gross margin was a negative 32.5% in the first half of 2011, compared with 3.3% in the same period of 2010. The year-over-year decline in gross margin resulted primarily from the decline in ASP and the sale of products at below cost to clear inventories.

Selling and distribution (“S&D”) expenses in the first half of 2011 were RMB47.8 million (US$7.4 million), compared with RMB60.9 million in the same period of 2010. The decrease in S&D expenses in the first half of 2011 was primarily due to lower advertising and promotion costs which were cut due to the poor sales performance of products launched in the first half of 2011.

General and administrative (“G&A”) expenses in the first half of 2011 were RMB23.9 million (US$3.7 million), compared with RMB23.5 million in the same period of 2010. Share-based compensation expenses recognized in G&A were RMB8.9 million (US$1.4 million) in the first half of 2011, compared to RMB9.3 million in the first half of 2010.

Research and development (“R&D”) expenses in the first half of 2011 were RMB13.1 million (US$2.0 million), compared to RMB9.4 million in the same period of 2010. The higher R&D expenses comparing with the same period of last year was primarily due to higher R&D investments to improve future product offerings.

Total share-based compensation expenses, which have been allocated to S&D, G&A and R&D expenses, decreased to RMB10.4 million (US$1.6 million) in the first half of 2011 from RMB11.0 million in the same period of 2010.

Operating loss for the first half of 2011 was RMB162.4 million (US$25.1 million), compared to RMB85.1 million in the first half of 2010.

During the first half of 2011, a principal amount of US$17.0 million of convertible notes plus accrued interest thereon of US$1.5 million were converted into 4,549,453 ordinary shares at a conversion price of US$4.05 per share. The transaction resulted in a gain on extinguishment of the convertible notes of RMB10.5 million (US$1.6 million).

Net loss attributable to holders of ordinary shares in the first half of 2011 was RMB148.4 million (US$23.0 million), compared to net loss of RMB64.5 million in the same period of 2010.

Basic and diluted loss per share were both RMB2.63 (US$0.41) in the first half of 2011. For the first half of 2010, basic and diluted loss per share were RMB1.22 and RMB1.53, respectively.

Foreign Exchange Rate Used

The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from Renminbi (RMB) into United States dollars for the convenience of the reader were calculated at the noon buying rate of US$1.00 = RMB6.4635 on June 30, 2011 in The City of New York for the cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on June 30, 2011, or at any other certain date. The percentages stated are calculated based on RMB.

About Qiao Xing Mobile Communication Co., Ltd.

Qiao Xing Mobile Communication Co., Ltd. is a domestic manufacturer of mobile handsets in China. Through its manufacturing facility in Huizhou, Guangdong Province, China, and a research and development center in Beijing, the Company develops, produces and markets a wide range of mobile handsets based primarily on the GSM, TD-SCDMA, and WCDMA technology. For more information, please visit http://www.qxmc.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 QXM’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. QXM does not undertake any obligation to update any forward-looking statement, except as required under applicable laws. All information provided in this press release is as of November 30, 2011, and QXM undertakes no duty to update such information, except as required under applicable laws.

For further information, contact:

Lucy Wang, Vice President
Qiao Xing Mobile Communication Co., Ltd.
Tel: (8610) 57315638
Email: wangjinglu@cectelecom.com

    Qiao Xing Mobile Communication Co., Ltd. and Subsidiaries
    Unaudited Condensed Consolidated Balance Sheets
    (Amounts in thousands)
                                        December          June
                                            31,            30,
                                             2010           2011
                                             ----           ----
                                           RMB            RMB

    Assets
    Cash                                2,755,505      2,550,733
    Restricted cash                        37,758        122,023
    Accounts receivable,
     net                                  239,390        287,839
    Inventories                            59,969         46,088
    Prepayments to
     suppliers                             86,302        159,614
    Prepaid expenses and
     other current assets                  33,683         42,901
                                           ------         ------
          Total current assets          3,212,607      3,209,198
    Property, machinery
     and equipment, net                    20,830         18,728
                                           ------         ------
          Total assets                  3,233,437      3,227,926
                                         ========       ========

    Liabilities and equity
    Short-term borrowings                 446,000        446,004
    Accounts payable                       39,737         73,409
    Prepayments from
     customers                              3,902         81,778
    Accrued liabilities                    19,178         57,340
    Amounts due to related
     parties                                8,136          5,208
    Other payables and
     current liabilities                    8,078          9,590
    Embedded derivative
     liability                             20,113              -
    Convertible notes                     112,162              -
                                          -------             --
          Total current
           liabilities                    657,306        673,329
    Warrant liability                      17,650          1,083
                                            -----          -----
          Total liabilities               674,956        674,412
                                           ======        =======

    Equity
    Shareholders' equity                2,474,417      2,474,982
    Noncontrolling
     interests                             84,064         78,532
                                           ------         ------
          Total equity                  2,558,481      2,553,514
                                         --------      ---------

          Total liabilities and
           equity                       3,233,437      3,227,926
                                        =========      =========

    Qiao Xing Mobile Communication Co., Ltd. and Subsidiaries
    Unaudited Condensed Consolidated Statements of Operations
    (Amounts in thousands, except share and per share data)
                                            Six months
                                              ended
                                              ----------
                                       June            June
                                        30,             30,
                                        2010            2011
                                       ----           -----
                                        RMB             RMB

    Revenues                           323,983         238,621
    Cost of goods sold                (313,133)       (316,189)
                                      --------        --------
    Gross profit (loss)                 10,850         (77,568)
     Selling and distribution
      expenses                         (60,850)        (47,801)
     General and
      administrative expenses          (23,541)        (23,886)
     Research and development
      expenses                          (9,388)        (13,128)
     Amortization of
      intangible assets                 (2,216)              -
                                        ------             ---
    Operating loss                     (85,145)       (162,383)
     Interest income                    12,106           8,778
     Interest expense                  (28,528)        (20,935)
     Foreign exchange (loss)
      gain, net                           (739)             70
     Gain (loss) on
      remeasurement of
      embedded derivatives              25,423          (7,467)
     Gain on remeasurement of
      warrant liability                 12,846          16,384
     Gain on extinguishment of
      convertible notes                      -          10,526
     Other (loss) income, net             (909)          1,069
                                          ----           -----
    Loss before income tax
     expense                           (64,946)       (153,958)
    Income tax expense                  (2,656)              -
                                        ------             ---
    Net loss                           (67,602)       (153,958)
    Net loss attributable to
     noncontrolling interests            3,078           5,532
                                         -----           -----
    Net loss attributable to
     holders of ordinary
     shares                            (64,524)       (148,426)
                                       =======        ========

    Loss per ordinary share:
     - Basic                             (1.22)          (2.63)
                                         =====           =====
     - Diluted                           (1.53)          (2.63)
                                         -----           -----

    Weighted average number
     of shares outstanding:
     - Basic                        52,685,000      56,511,000
                                    ==========      ==========
     - Diluted                      56,647,000      56,511,000
                                    ----------      ----------

SOURCE Qiao Xing Mobile Communication Co., Ltd.


Source: PR Newswire