China XD Plastics to Restate Financial Results to Reflect Certain Non-Cash Adjustments to EPS and Classification Adjustments for Certain Cash Flow Items
-Restatements Will be for Fiscal Years 2009 and 2010, Third Quarters 2009 and 2010 and First Quarters 2010 and 2011-
-Restatements Do Not Impact the Company's Business Operations or Previously Reported Financial Position, Cash Position, Total Assets, Liabilities, Revenue or Net Income-
-Company Provides Preliminary Third Quarter 2011 Results-
HARBIN, China, Oct. 31, 2011 /PRNewswire-Asia-FirstCall/ -- China XD Plastics Company Limited (NASDAQ: CXDC, "China XD Plastics" or the "Company"), one of China's leading players engaged in the development, manufacture, and sale of modified plastics primarily for automotive applications, today announced that it will restate certain financial statements for the years ended December 31, 2009 and 2010, the third quarters ended September 30, 2009 and 2010, and the first quarters ended March 31, 2010 and 2011 and file amendments to those affected periodic filings for years 2010 and 2011. The restatements will reflect certain technical corrections regarding non-cash adjustments relating to the calculation of basic and diluted earnings-per-share ("EPS") and classification adjustments relating to certain items in the consolidated statements of cash flows.
The Company previously disclosed the adjustments to the calculation of basic and diluted EPS in its Form 10-Q filed with the Securities and Exchange Commission ("SEC") on August 15, 2011 and referenced the adjustments on its earnings call of the same date. The EPS adjustment only impacts the consolidated statements of income and other comprehensive income below the operating line and is non-cash in nature. The restatements will have no effect on the Company's business operations, financial position, cash position, total assets, liabilities, revenue or net income, as previously reported. Moreover, there is no impact on non-GAAP operating earnings which the Company deems as reflective of its operating results.
Mr. Jie Han, Chairman and CEO of China XD Plastics, stated, "These restatements relate to non-cash adjustments to the calculation of EPS and certain cash flow classification adjustments to our financial statements. The resolution of these items reflects our continuing internal commitment to maintaining accounting best practices. It is important to note that these adjustments do not impact our current or future business operations. They also do not impact our financial position, cash position, total assets, liabilities, revenue or net income, as previously reported. Our business and financial position are strong, and we look forward to devoting energy and resources to domestic capacity expansion and production line upgrades which are proceeding according to plan, and to focusing on continuing to provide solid, consistent results for our shareholders."
Overview of Restated Results
The restatements will reflect (1) certain technical corrections regarding non-cash adjustments relating to the calculation of basic and diluted EPS and (2) classification adjustments relating to certain items in the consolidated statements of cash flows. A detailed explanation, as well as the impact, of these items on prior periods is provided below:
Calculation of Basic and Diluted EPS
As previously disclosed in August 2011, the Company did not apply the two-class method in the calculation of basic and diluted EPS in the prior periods' financial statements. After application of the two-class method, both basic and diluted EPS for the quarter ended March 31, 2010 should be reduced by US$0.02 per share and the basic and diluted EPS for the year ended December 31, 2010 should be reduced by US$0.01 and US$0.02 per share, respectively. In addition, the Company did not deduct the non-cash changes in fair values of warrants from net income attributable to common stockholders in the calculation of diluted EPS. After the accounting for the deduction of such non-cash changes in fair values of warrants from net income attributable to common stockholders, the diluted EPS for the quarters ended March 31, 2010, December 31, 2010 and March 31, 2011, and for the year ended December 31, 2010 should be reduced by US$0.04 per share, US$0.05 per share, US$0.01 per share and US$0.08 per share, respectively. The diluted EPS for the quarters ended June 30, 2010, September 30, 2010 and June 30, 2011 were not impacted.
Classification of Certain Cash Flow Items
The Company identified that the following three classification adjustments were required in its consolidated statements of cash flows:
- The Company did not consider the impact of the unpaid amounts relating to property, plant and equipment in preparing the consolidated statements of cash flows for the interim and annual periods from January 1, 2009 to June 30, 2011.
- The Company settled purchase obligations due to its equipment vendors using bank acceptance notes the Company received from its customers. The Company reported such transactions as both operating cash inflows and investing cash outflows, instead of non-cash transactions.
- In the year ended December 31, 2009, the Company settled a related party loan using bank acceptance notes the Company received from its customers. The Company reported such transaction as both operating cash inflows and financing cash outflows, instead of non-cash transactions. The adjustment is not applicable to the year ended December 31, 2010.
The classification adjustments indicated above have no effect on the Company's beginning or ending balances of cash and cash equivalents on its consolidated statements of cash flows. Further, these adjustments have no effect on the Company's financial position, cash position, total assets, liabilities, revenue or net income, as previously reported, nor do they impact, or reflect any changes to, the Company's actual business operations.
The Company is in the process of amending and restating the affected financial statements. The Company will be filing Amendment No.2 to the Annual Report on Form 10-K for the year ended December 31, 2010 (the "Form 10-K/A"), Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, and Amendment No. 1 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (collectively, the "Form 10-Q/As") with the SEC on November 2, 2011. The Form 10-K/A and Form 10-Q/As will contain the amended and restated financial statements. The Company expects that this process will not impact its ability to timely file its results for the third quarter of 2011.
The items described above and corresponding restatements have been discussed with Moore Stephens Hong Kong, the Company's predecessor independent registered public accounting firm from November 2, 2009 to August 15, 2011.
Preliminary Summary of Third Quarter Results
Based on preliminary information, the Company currently expects third quarter revenue to range between US$100 million and US$106 million and net income attributable to common shareholders to range between US$14.5 million and US$15 million. The Company will update its outlook for fiscal 2011 when it reports earnings on November 15, 2011.
Mr. Han concluded, "We performed very well in the third quarter of 2011 and are happy with the preliminary results for the period. We look forward to discussing our performance and business outlook in detail when we report final third quarter results."
Additional information with respect to the above-described restatements of the Company's financial results can be found in the Company's Form 8-K filed today with the SEC.
In a separate press release issued today, the Company announced that it will release financial results for the third quarter ended September 30, 2011 before the NASDAQ market open on Tuesday, November 15, 2011.
About China XD Plastics Company Limited
China XD Plastics Company Limited, through its wholly-owned subsidiary, Harbin Xinda Macromolecule Material ("Xinda"), develops, manufactures, and sells modified plastics, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of more than 70 automobile brands manufactured in China, including AUDI, BMW, Toyota, Buick, Mazda, VW Golf, Jetta, and Hafei new energy vehicles. The Company's wholly-owned research center is dedicated to the research and development of modified plastics, and benefits from its cooperation with well-known scientists from prestigious universities in China. As of September 30, 2011, 202 of Xinda's products have been certified for use by one or more of the automobile manufacturers in China. For more information please visit http://www.chinaxd.net.
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's expected timing of its periodic filings including amendments thereto and the Company's operating results for its third quarter and fiscal 2011. These forward-looking statements are based on current expectations, assumptions, estimates and projections about the Company and the industry, and are subject to known and unknown risks and uncertainties and other risks detailed in the Company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
China XD Plastics
Mr. Taylor Zhang, CFO
FTI Consulting for China XD Plastics
Ms. Cara O'Brien (Hong Kong)
Mr. Eric Boyriven (New York)
Ms. Mingxia Li (Beijing)
SOURCE China XD Plastics Company Limited