EX-99.1 2 d76074exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
Qiao Xing Universal Resources, Inc. Reports First Half 2010 Financial Results
     HUIZHOU, Guangdong, China, Sept. 10 /PRNewswire-Asia/ —
     This press release is issued for information purposes only and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor is it a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this press release in any jurisdiction in contravention of applicable law.
     Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Proposed Offer or securities to be issued in connection therewith, or passed upon the adequacy or accuracy of this press release, or the merits or fairness of the Proposed Offer. Any representation to the contrary is a criminal offense.
     Qiao Xing Universal Resources, Inc. (Nasdaq: XING) (“the Company” or “XING”), an emerging Chinese resources company headquartered in Huizhou, Guangdong Province, today announced its unaudited results for the six months ended June 30, 2010.
     First Half Highlights
    The Company reported net income of RMB100.6 million (US$14.8 million), or RMB1.12 (US$0.17) per basic share, compared to a net loss of RMB184.1 million or RMB3.62 per basic share in the first half of 2009 (after attribution of the non-controlling interest).
 
    Net sales were RMB465.9 million (US$68.7 million) compared to RMB1,044.1 million in the first half of 2009.
 
    Gross profit was RMB77.3 million (US$11.4 million) compared to RMB215.8 million in the first half of 2009. Gross margin was 16.6% compared to 20.7% in the first half of 2009.
     “We are pleased to return to profitability following our efforts to strategically transform the Company into a resources-focused enterprise,” commented Mr. Ruilin Wu, the Company’s Chairman and Chief Executive Officer. “Recently, we have made a proposal to privatize Qiao Xing Mobile Communication Co., Ltd (NYSE: QXM, or “QXMC”), which represents a major milestone for our business. In addition, we are making steady progress in our proposed acquisitions of molybdenum, copper, lead and zinc mines. These developments demonstrate our clarity on future direction and our confidence in the long-term growth in the resources industry. We believe we are on the right track to enhancing long-term shareholder value.”
     Financial Review of Operations for Molybdenum Mine Business
    Consolidated revenue from the mining business for the first half of 2010 totaled RMB141.9 million (US$20.9 million). Gross profit was RMB66.4 million (US$9.8 million), resulting in gross margin of 46.8%. Net income totaled RMB45.4 million (US$6.7 million), of which RMB27.5 million (US$4.1 million) was generated in the second quarter of 2010. Net income in the second quarter of 2010 increased by 53.3% from the

 


 

      first quarter of 2010, when business was seasonally slower as most mining businesses in North China shut down operations for the long Chinese New Year holiday in February 2010.
 
    Molybdenum concentrate production in the first half of 2010 was 1,550.0 tons (3.42 million pounds), equivalent to 745.7 tons (1.64 million pounds) of molybdenum metal.
 
    Average cost of sales of molybdenum metal produced in the first half of 2010 was RMB101,144 (US$14,915) per ton, or RMB45.97 (US$6.78) per pound. Average cash cost of molybdenum metal produced in the first half of 2010 was RMB65,276 (US$9,626) per ton, or RMB29.60 (US$4.36) per pound. (The Company produces molybdenum concentrate and does not engage in smelting operations, so the cash cost does not include the cost of smelting).
 
    Capital expenditures for the mining business in the first half of 2010 totaled RMB33.6 million (US$4.9 million). These capital expenditures were all used for the construction of the Company’s Chifeng Haozhou mine.
     The average price of molybdenum concentrate sold by the Company’s Chifeng Haozhou Mine for the six months ended June 30, 2010 was RMB2,212 per ton, representing an increase of 2.4% from RMB2,160 per ton for the six months ended December 31, 2009.
     Financial Review of Operations for Telecommunication Business
    Revenues were RMB324.0 million (US$47.8 million) compared to RMB1,039.6 million in the first half of 2009.
 
    Handset shipments were 621,000 units compared to 1,593,000 units in the first half of 2009.
 
    Gross margin was 3.3% compared to 20.7% in the first half of 2009.
 
    Operating loss was RMB85.1 million (US$12.6 million) compared to operating income of RMB122.6 million in the first half of 2009.
 
    Net loss was RMB64.5 million (US$9.5 million) in the first half of 2010 compared to net loss of RMB 62.1 million in the first half of 2009.
     Our telecommunications business is operated through QXMC.
     The decrease in revenues was primarily due to lower unit shipments and a decrease in the average selling price (“ASP”) of products sold in the first half of 2010.
     The decrease in handset shipments was primarily due to fewer new model launches and a slow-down in shipments amid intense competition in the PRC handset market.
     The ASP of handset products decreased to RMB513 (US$76) in the first half of 2010 from RMB646 in the first half of 2009, which was primarily due to the launch of lower-priced products to target the lower-end market and price reductions to drive sales in an increasingly competitive environment.
     Gross profit in the first half of 2010 was RMB10.8 million (US$1.6 million), compared to RMB214.8 million in the same period of 2009. The year-over-year decline in gross profit and gross margin was primarily a result of the decline in ASP.

 


 

     Selling and distribution (“S&D”) expenses in the first half of 2010 were RMB60.9 million (US$9.0 million), compared to RMB52.5 million in the same period of 2009. The increase in S&D expenses was primarily due to the airtime costs incurred from the sale of handset products through the infomercial arrangement. Airtime costs incurred from TV infomercial sales were RMB55.2 million in the first half of 2010, compared to RMB42.0 million in the same period of 2009. The increase in airtime costs was however offset by lower payroll costs and other advertising and promotion expenses.
     General and administrative (“G&A”) expenses were RMB23.5 million (US$3.5 million), compared to RMB23.9 million in the same period of 2009. Share-based compensation expenses recognized in G&A were RMB9.3 million (US$1.4 million) in the first half of 2010, compared to RMB5.5 million in the first half of 2009.
     Research and development (“R&D”) expenses were RMB9.4 million (US$1.4 million), compared to RMB13.5 million in the same period of 2009. The lower R&D expenses were primarily due to lower payroll costs and software license fees.
     Total share-based compensation expenses, which have been allocated to S&D, G&A and R&D expenses, increased to RMB11.0 million (US$1.6 million) in the first half of 2010 from RMB6.5 million in the same period of 2009.
     Operating loss for the first half of 2010 was RMB85.1 million (US$12.6 million), compared to operating income of RMB122.6 million in the first half of 2009.
     Financial Conditions
     As of June 30, 2010, XING and its subsidiaries held US$538.2 million in cash and cash equivalents and US$519.5 million in working capital. Shareholders’ equity was US$652.5 million as of June 30, 2010.
     As of June 30, 2010, QXM and its subsidiaries held US$436.5 million in cash and cash equivalents and US$401.0 million in working capital. Shareholders’ equity was US$419.8 million as of June 30, 2010.
     Outlook
    We anticipate that in the second half of 2010, we will see continued growth in our Haozhou Molybdenum Mining business, which may grow eventually to contribute net profit of over US$24million in FY2011.
 
    The acquisition of Balinzuo Banner Xinyuan Mining Co., Ltd, which owns a relatively large-scale lead-zinc mine in Balinzuo Banner, in the Inner Mongolia Autonomous Region of the People’s Republic of China, is expected to be completed in the fourth quarter of 2010. We expect to increase this Lead-zinc mine’s production capacity to mill 2,000 tons of ore per day after completion of the acquisition and hope that it will be another major cash and net income generator to XING.
 
    We are now evaluating the opportunities of acquiring some other big mines. With the expected completion of the proposed privatizing of our subsidiary QXMC, XING will have strong financial resources for future acquisitions and become a “Pure Resources, Bigger Player” finally.
     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 the amounts from Renminbi (RMB) into United States dollars for the convenience of readers were calculated at the noon buying rate of US$1.00 = RMB6.7815 on June 30, 2010 in The City of New York for the cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on June 30, 2010, or at any other certain date. The percentages stated are calculated based on RMB.
FINANCIAL TABLES FOLLOW
Qiao Xing Universal Resources, Inc. and its Subsidiaries
Condensed Consolidated Profit and Loss Account
For six months ended June 30
                         
    2009   2010
    RMB’000   RMB’000   US$’000
 
                       
Net sales
    1,044,144       465,856       68,695  
Cost of goods sold
    (828,350 )     (388,557 )     (57,297 )
Gross profit
    215,794       77,299       11,398  
Total operating expenses
    (125,938 )     (103,920 )     (15,324 )
Income from operation
    89,856       (26,621 )     (3,926 )
Net non-operating income (loss)
    (109,792 )     117,019       17,256  
Income before income tax
    (19,936 )     90,398       13,330  
Provision for income tax
    (35,499 )     (17,962 )     (2,649 )
Net income from continuing operations, net of tax
    (55,435 )     72,436       10,681  
Discontinued operations, net of tax
    (145,480 )            
Net income (loss) for the year
    (200,915 )     72,436       10,681  
Net loss (income) attributable to the noncontrolling interest
    16,842       28,166       4,154  
Net income (loss) after attribution of the noncontrolling interest
    (184,073 )     100,602       14,835  
To participatory convertible notes
                 
To common stock
    (184,073 )     100,602       14,835  
Basic earnings (loss) per common share:
                       
Before extraordinary gain
    (3.62 )     1.12       0.17  
Extraordinary gain
                 
After extraordinary gain
    (3.62 )     1.12       0.17  
Weighted average number of shares outstanding
                       
Basic
    50,876,616       89,897,243       89,897,243  

 


 

Qiao Xing Universal Resources, Inc. and its Subsidiaries
Condensed Consolidated Balance Sheet
                         
    December 31,   June 30,
    2009   2010
    RMB’000   RMB’000   US$’000
ASSETS
                       
CURRENT ASSETS
                       
Cash and cash equivalents
    3,709,503       3,649,528       538,159  
Restricted cash
    251,720       155,053       22,864  
Bills receivable
                 
Accounts receivable, net
    123,082       293,530       43,284  
Inventories
    98,012       145,452       21,448  
Prepaid expenses
    184,339       160,781       23,709  
Other current assets
    37,025       33,684       4,967  
Due from related parties
    25       25       4  
Deferred income taxes
    15,942       13,087       1,930  
Deferred debt issuance costs, net
                 
Assets held for sale
    163,000              
Due from discontinued operations
    200,000       130,000       19,170  
TOTAL CURRENT ASSETS
    4,782,648       4,581,140       675,535  
NON-CURRENT ASSETS
                       
Property, machinery and equipment, net
    170,485       236,629       34,893  
Proven and probable reserves
    712,121       694,453       102,404  
Construction-in-progress
    86,591       42,394       6,251  
Investment at cost
    5,000              
Goodwill
    82,058       82,058       12,100  
Value beyond proven and probable reserves
    67,295       67,295       9,923  
Other acquired intangible assets, net
    4,433       2,216       328  
Deferred income taxes — noncurrent
          1,618       239  
TOTAL NON-CURRENT ASSETS
    1,127,983       1,126,663       166,138  
TOTAL ASSETS
    5,910,631       5,707,803       841,673  
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY
                       
CURRENT LIABILITIES
                       
Short term bank borrowings
    884,708       715,600       105,522  
Accounts payable
    60,750       85,823       12,655  
Other payables
    57,238       10,205       1,505  
Accrued liabilities
    40,472       40,757       6,010  
Deposits received
    1,310       1,310       193  
Deferred revenues
    16,370       49,418       7,287  
Due to related parties
    5,118       5,153       760  
Taxation payable
    15,016       16,330       2,409  
Convertible notes
    233,716       112,162       16,539  
Embedded derivatives liabilities
    63,096       14,439       2,129  
Assets retirement obligation
    4,013       7,050       1,040  
TOTAL CURRENT LIABILITIES
    1,381,807       1,058,247       156,049  
LONG-TERM LIABILITIES
                       
Shareholders loans
    6,732       6,688       986  
Warrants liabilities
    148,921       45,099       6,650  
Deferred tax liabilities
    175,281       172,661       25,461  
TOTAL NON-CURRENT LIABILITIES
    330,934       224,448       33,097  
TOTAL LIABILITIES
    1,712,741       1,282,695       189,146  

 


 

                         
    December 31,   June 30,
    2009   2010
    RMB’000   RMB’000   US$’000
SHAREHOLDERS’ EQUITY
                       
XING equity
                       
Common stock, par value RMB0.008 (equivalent of US$0.001); authorised 200,000,000 shares as of December 31, 2009 and March 31, 2010; outstanding and fully paid — 82,327,993 shares as of December 31, 2009 and 90,294,134 shares as of March 31, 2010
    602       669       99  
Additional paid-in capital
    2,404,998       2,554,802       376,731  
Cumulative translation adjustments
    (160,352 )     897,338       132,322  
Retained earnings
    796,736       (160,217 )     (23,626 )
TOTAL XING EQUITY
    3,041,984       3,292,592       485,526  
NONCONTROLLING INTEREST
    1,156,086       1,132,516       167,001  
TOTAL EQUITY
    4,198,070       4,425,108       652,527  
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
    5,910,631       5,707,803       841,673  
     About Qiao Xing Universal Resources, Inc.
     Qiao Xing Universal Resources, Inc. is an emerging Chinese resources company headquartered in Huizhou, Guangdong Province, China. The Company was previously one of the leading players of telecommunication terminal products in China, but made the strategic decision to diversify into the resources industry in 2007. In April 2009, the Company acquired the 100% equity interest in China Luxuriance Jade Company, Ltd (“CLJC”). CLJC, through its wholly owned Chinese subsidiaries, owns the rights to receive the expected residual returns from Chifeng Haozhou Mining Co., Ltd. (“Haozhou Mining”), a large copper-molybdenum poly-metallic mining company in Inner Mongolia, China. Since then, the Company has further refined its strategy to become a pure resources company and is actively seeking additional acquisition targets in the resources industry.

 


 

     Safe Harbor Statement
     This press release contains forward-looking statements that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” and similar expressions. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed. You should not place undue reliance on these forward-looking statements.
     Forward-looking statements include all statements other than statements of historical facts, such as statements regarding anticipated acquisitions, the privatization of QXMC, anticipated mining capacity and production volumes, long-term growth prospects for the resources industry, the Company and value for the Company’s shareholders, mine development and capital expenditures, mine production and development plans, estimates of proven and probable reserves and other mineralized material and the Company’s transition to a pure resources company and bigger player within the resources industry. Readers are cautioned that forward-looking statements are not guarantees of future performance and actual results may differ materially from those projected, anticipated or assumed in the 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 Resources, Inc. 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 September 10, 2010.
     Additional Information and Where to Find It
     Qiao Xing Universal Resources, Inc. plans to file a Schedule 13E-3 with the United States Securities and Exchange Commission (the “SEC”) in connection with its proposed offer to acquire all of the outstanding shares of QXMC that it does not currently own (the “Proposed Offer”). The Schedule 13E-3 will contain additional information regarding the Proposed Offer, including, without limitation, information regarding the special meeting of shareholders of Qiao Xing Mobile Communication Co., Ltd that will be called to consider the Proposed Offer. The Schedule 13E-3 will contain important information about Qiao Xing Universal Resources, Inc., Qiao Xing Mobile Communication Co., Ltd, the Proposed Offer and related matters. Investors and shareholders should read the Schedule 13E-3 and the other documents filed with the SEC in connection with the Proposed Offer carefully before they make any decision with respect to the Proposed Offer. A copy of the Scheme of Arrangement with respect to the Proposed Offer will be an exhibit to the Schedule 13E-3. The Proposed Offer is expected to be exempt from the registration requirements of the United States Securities Act of 1933 Act by virtue of the exemption provided by Section 3(a)(10); however, it is possible that the offer may change forms such that the exemption provided by Section 3(a)(10) may no longer be available. In such a case Qiao Xing Universal Resources, Inc. may file a Form F-4 with respect to the Proposed Offer.
     The Schedule 13E-3 and all other documents filed with the SEC in connection with the Proposed Offer will be available when filed free of charge at the SEC’s web site at www.sec.gov. Additionally, the Schedule 13E-3 and all other documents filed with the SEC in connection with the Proposed Offer will be made available to investors or shareholders free of charge by calling or writing to:
  Company Contact:    Rick Xiao, Vice President
Qiao Xing Universal Resources
Phone: +86-752-282-0268
Email: rick@qiaoxing.com
     For more information, please contact:
Company Contact:
   Mr. Rick Xiao, Vice President
   Email: rick@qiaoxing.com
   Tel: +86-752-282-0268
CCG Investor Relations Contact:
   Mr. Ed Job, Account Manager
   Email: ed.job@ccgir.com
   Tel: +1-646-213-1914 (NY office)
SOURCE Qiao Xing Universal Resources, Inc.