QXM Qiao Xing Mobile Communication Co., Ltd. Ordinary Shares

BEIJING, Aug. 12 /PRNewswire-Asia-FirstCall/ -- Qiao Xing Mobile Communication Co., Ltd. (NYSE:QXM) ("Qiao Xing Mobile" or "the Company"), a domestic manufacturer of mobile handsets in China, today announced its unaudited financial results for the three months ended March 31, 2009. First Quarter 2009 Results -- Revenues were RMB460.8 million (US$67.4 million) compared to RMB604.5 million in 1Q08 -- Gross margin was 17.9% compared to 31.4% in 1Q08 -- Net income was RMB6.3 million (US$0.9 million) compared to RMB106.3 million in 1Q08 -- Basic and diluted earning per share was RMB0.10 (US$0.01) compared to RMB2.00 in 1Q08 Revenues for the first quarter of 2009 were RMB460.8 million (US$67.4 million), compared with RMB604.5 million in the same period of 2008. The decrease from the first quarter of 2008 was primarily due to lower unit shipments and a decrease in the average selling price ("ASP") of products sold in the first quarter of 2009. Total handset shipment in the first quarter of 2009 was 762,000 units, compared with 846,000 units in the same period of 2008. The decrease in handset shipments compared to the same period of last year was primarily due to the economic slowdown in China, and the strategic shift to focus on the higher-end VEVA series products. Shipment of the high-end VEVA series products accounted for 30.8% of total shipment in the first quarter of 2009, compared with none in the same period of 2008. The ASP of handset products decreased to RMB599 (US$88) in the first quarter of 2009, as compared to RMB707 in the first quarter of 2008. The lower ASP compared to the same period last year arose primarily due to price reductions to deal with the economic slowdown in China. Gross profit in the first quarter of 2009 was RMB82.3 million (US$12.0 million), compared with RMB189.9 million in the same period of 2008. Gross margin was 17.9% in the first quarter of 2009, compared with 31.4% in the same period of 2008. The decrease in gross margin arose primarily due to the decline in ASP. Selling and distribution ("S&D") expenses in the first quarter of 2009 were RMB20.7 million (US$3.0 million), compared with RMB16.8 million in the same period of 2008. The increase in S&D expenses was primarily driven by an increase in the headcount of sales personnel. General and administrative ("G&A") expenses were RMB12.0 million (US$1.8 million), compared with RMB11.2 million in the same period of 2008. Share- based compensation expenses recognized in G&A were RMB2.7 million (US$0.4 million) in the first quarter of 2009, compared to RMB3.7 million in the first quarter of 2008. Research and development ("R&D") expenses were RMB7.0 million (US$1.0 million), compared to RMB5.7 million in the same period of 2008. The higher R&D expenses comparing with the same period of last year was primarily due to higher payroll costs and software license fees. Total share-based compensation expenses, which have been allocated to S&D, G&A and R&D expenses, decreased to RMB3.2 million (US$0.5 million) in the first quarter of 2009, compared to RMB4.4 million in the same period of 2008, primarily because certain options had become fully vested in April 2008, and also because of the appreciation of the RMB against the US$. Operating income in the first quarter of 2009 was RMB41.3 million (US$6.1 million), compared to RMB152.0 million in the first quarter of 2008. Net income in the first quarter of 2009 was RMB6.3 million (US$0.9 million), compared to RMB106.3 million in the same period of 2008. Diluted EPS was RMB0.10 (US$0.01), compared with RMB2.00 in the same period of 2008. Business Outlook With the improvement in the general economic environment, Qiao Xing Mobile is cautiously optimistic that it will begin to see sequential improvement in its operating results in the quarters ahead. Foreign Exchange Rate Used The United States dollar (US$) 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$1.00 = RMB6.8329 on March 31, 2009 in The City of New York for the cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on March 31, 2009, 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. The Company manufactures and sells mobile handsets based primarily on GSM, TD-SCDMA, and WCDMA. It operates its business primarily through CEC Telecom Co., Ltd., or CECT, its 96.6%-owned subsidiary in China. In 2008, Qiao Xing Mobile introduced the VEVA series mobile phones and began to open its own retail stores to target the mid income consumers in major cities throughout China. Through its manufacturing facility in Huizhou, Guangdong Province, China, and two research and development centers in Huizhou and Beijing, the Company develops, produces and markets a wide range of mobile handsets, with increasing focus on differentiated products that generally generate higher profit margins. 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 August 12, 2009, and QXM undertakes no duty to update such information, except as required under applicable laws. For further information, contact: Lucy Wang Qiao Xing Mobile Communication Co., Ltd. Tel: +86-10-8219-3883 Email: Qiao Xing Mobile Communication Co., Ltd. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (Amounts in thousands) December 31, March 31, 2008 2009 RMB RMB Assets Cash 2,907,148 2,948,434 Restricted cash 136,299 74,932 Accounts receivable, net 462,282 483,186 Bills receivable 43,516 750 Inventories 183,169 169,505 Prepayments to suppliers 363,907 318,693 Prepaid expenses and other current assets 38,996 36,586 Deferred income taxes 6,994 4,226 Deferred debt issuance costs, net 34,689 28,210 Total current assets 4,177,000 4,064,522 Property, machinery and equipment, net 167,233 164,648 Land use rights 35,304 35,103 Equity investment 7,803 7,803 Goodwill 112,814 112,814 Other intangible assets, net 22,766 21,576 Total assets 4,522,920 4,406,466 Liabilities, minority interests and shareholders' equity Short-term borrowings 983,950 863,950 Accounts payable 52,047 44,085 Prepayments from customers 42,551 34,865 Accrued liabilities 50,014 53,770 Amounts due to related parties 11,155 31,043 Other payables and current liabilities 7,227 20,979 Income taxes payable 38,462 10,275 Embedded derivative liability 124,130 82,186 Convertible notes 206,211 248,311 Total current liabilities 1,515,747 1,389,464 Deferred income taxes 320 255 Total liabilities 1,516,067 1,389,719 Minority interests 92,065 92,821 Shareholders' equity 2,914,788 2,923,926 Total liabilities, minority interests and shareholders' equity 4,522,920 4,406,466 Qiao Xing Mobile Communication Co., Ltd. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (Amounts in thousands, except share and per share data) Three months ended March 31, December 31, March 31, 2008 2008 2009 RMB RMB RMB Revenues 604,455 557,847 460,756 Cost of goods sold (414,583) (336,749) (378,498) Gross profit 189,872 221,098 82,258 Selling and distribution expenses (16,761) (35,388) (20,740) General and administrative expenses (11,232) (8,838) (11,988) Research and development expenses (5,685) (8,545) (6,992) Amortization of intangible assets (4,222) (1,190) (1,190) Impairment of intangible assets -- (26,235) -- Operating income 151,972 140,902 41,348 Interest income 6,589 4,658 4,185 Interest expense (13,725) (65,783) (68,724) Foreign exchange gain (loss), net 4,367 1,700 654 (Loss) gain on remeasurement of embedded derivatives -- (7,774) 42,137 Other income (loss), net 291 1,642 136 Income before income tax expense and minority interests 149,494 75,345 19,736 Income tax expense (39,076) (37,395) (12,665) Income before minority interests 110,418 37,950 7,071 Minority interests (4,118) (3,901) (756) Net income 106,300 34,049 6,315 Basic and diluted earnings per share 2.00 0.56 0.10 Weighted average number of shares outstanding 53,028,000 47,610,000 47,610,000 DATASOURCE: Qiao Xing Mobile Communication Co., Ltd. CONTACT: Lucy Wang of Qiao Xing Mobile Communication Co., Ltd., +86-10- 8219-3883, or Web site: http://www.qxmc.com/

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