China XD Plastics Announces First Quarter 2010 Results
-- Revenue grew 89.6% to $50.0 million
-- Net income grew 225.7% to $13.1 million
HARBIN, China, May 12 /PRNewswire-Asia-FirstCall/ -- China XD Plastics Company Ltd. ("China XD Plastics" or the "Company")(Nasdaq: CXDC), a leading Chinese developer, manufacturer, and distributor of modified plastics primarily for use in the automotive applications in China, today announced financial results for the first quarter ended March 31, 2010.
First Quarter 2010 Highlights
-- Revenue was a record $50.0 million, an increase of 89.6% from the first
quarter of 2009
-- Gross profit was $11.9 million, an increase of 106.7% from the first
quarter of 2009
-- Gross profit margin was 23.8%, compared to 21.8% in the first quarter
of 2009
-- Net income attributable to common shares was $10.5 million, $0.25 per
fully diluted share
-- Adjusted net income was $6.1 million or $0.15 per fully diluted share
-- Total volume shipped was 23,182 metric tons, up 29.5% from 17,899
metric tons in the first quarter of 2009
"We are very pleased with our strong results for the quarter. In addition to our recent capacity expansion, we benefited from the positive macroeconomic environment in China, as demand for vehicles continue to be strong," commented Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics. "We are also pleased to report that we were granted two product certifications from Shanghai General Motors Co., Ltd. (Shanghai GM), this being the first time China XD Plastics' products have been certified by a US OEM, which we believe paves the way for us to supply auto-part manufacturers selling to US OEMs and eventually expand our market opportunity to include the US in the future. We continue to see significant opportunities for the rapid and profitable growth of our business in the quarters ahead and we strongly believe we have the right strategies to participate in the expected growth of the automotive industry in China."
First Quarter 2010 Results
Revenue for the first quarter of 2010 increased 89.6% to a record of $50.0 million, compared to $26.4 million in the same period of 2009. The increase in revenue is primarily attributable to the increased sales volume driven by the strong demand for the Company's modified plastic products supported by continued growth in automotive production and consumption in China.
Gross profit for the first quarter of 2010 was $11.9 million, up 106.7% from $5.8 million in the first quarter 2009. Gross margin was 23.8% compared to 21.8% in the same period a year ago and 23.6% in the fourth quarter of 2009. The year-over-year increase in gross margin was due to higher value product mix as result of the Company's successful research, development and marketing efforts.
Selling expenses for the first quarter of 2010 were $91,379, up 100.2% from $45,651 in the same period last year. As a percentage of revenue, selling expenses remained 0.2% of sales for the first quarter 2010 and 2009. General and administrative (G&A) expenses were $1.9 million, up 81.8% from $1.0 million for the same period of last year. The increase in G&A expenses was mainly attributed to stock-based compensation to employees and consultants. Research and Development ("R&D") expenses were $1.5 million, or 3.0% of total revenue, compared to $0.3 million, or 1.1% of total revenue, in the same period last year. The increase in research and development expenses was associated with the Company's on-going efforts in R&D to launch new products.
Operating income for the first quarter of 2010 was $8.4 million, compared to an operating income of $4.4 million in the same period a year ago. Operating margin was 16.8% in the first quarter of 2010, compared to 16.6% in the comparable period a year before.
Other income (expense) in the first quarter of 2010 was $4.7 million, including $406,039 interest expense and a non-cash income of $5.1 million to account for the change in fair value of warrants and derivative liabilities in connection with the preferred stock issued in the private placement financing closed in December 2009. Other expense in the first quarter of 2009 was $356,250.
EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the first quarter of 2010 was $10.0 million, a significant increase from $4.8 million in the first quarter of 2009. For a detailed reconciliation of adjusted EBITDA, a Non-GAAP measure, to its nearest GAAP equivalent, please see the financial tables at the end of this release.
Net income for the first quarter of 2010 was $13.1 million, compared to net income of $4.0 million for the same period a year ago.
In connection with the private placement of series C preferred stock in the first quarter of 2010, the Company recorded a dividend of $2.6 million for series C preferred stock.
Net income attributable to common shareholders for the first quarter of 2010 was $10.5 million. Earnings per share attributable to common shareholders were $0.26 and $0.25 per basic and fully diluted share, respectively.
Adjusted net income, excluding non-cash charges associated with stock based compensation, change in fair value of derivative liability and preferred dividend was $6.1 million, or $0.15 per basic and per fully diluted share. For a detailed reconciliation of adjusted net income, a non-GAAP measure, to net income, please see the financial tables at the end of this release.
Financial Condition
As of March 31, 2010, China XD plastics had $5.1 million in cash and cash equivalents, $8.8 million in restricted cash, $37.8 million in working capital and a current ratio of 2.1. Shareholder's equity as of March 31, 2010 stood at $60.8 million compared to $21.5 million at the end of 2009.
Recent Events
On February 8, 2010, the Company announced selected estimated unaudited financial results for the first quarter and fiscal year 2010.
On February 25, 2010, China XD Plastics announced the total annual production capacity of modified plastics to increase 42.9% from 70,000 tons in 2010 to 100,000 tons. The additional 30,000 tons of annual production capacity is expected to start production at the beginning of the second quarter, 2010.
On March 4, 2010, China XD Plastics announced the signing of a one-year non-exclusive agreement with Ningbo Huading New Material Technology Company Limited ("NHNM") to distribute the Company's modified plastics for automotive applications in the Eastern Chinese Market, specifically in the area of Zhejiang Province.
Business Outlook and Guidance
The Company continues to experience a favorable macroeconomic environment, supported by the Government stimulus program implemented in 2009 in response to the global economic crisis, and by positive underlying fundamentals such as rising disposal incomes, expanding highway network and increasing affordability of car ownership. Moving forward China XD Plastics expects to be able to capitalize on its recently announced capacity expansion to 100,000 tons per year, to continue to deliver rapid growth in revenue and profits.
The Company expects 2010 revenues to be in the range between $170 million to $200 million, and non-GAAP adjusted net income to be in the range between $27 million to $30 million, excluding any non-cash charge related to the change in fair value of the existing derivative liabilities and stock-based compensation.
"In the past year, the Chinese automotive industry surpassed the United States and Japan, driven by favorable government policies, as well as solid long-term fundamentals, including low car-ownership levels and rising prosperity. In addition, the competitive environment in our industry remains favorable due to high barriers to entry associated with costly OEM certification process," said Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics. "Our business outlook remains positive, and we are on target to deliver on our guidance for the year."
Conference Call
China XD Plastics will host a conference call at 8:00 a.m. ET on Wednesday, May 12, 2010, to discuss the first quarter 2010 results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-353-4923. International callers should dial +1-702-894-2405. The pass code for the call is 72659894. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on May 12, 2010 at 11:00 a.m. ET. To access the replay, dial 1-800-642-1687. International callers should dial +1-706-645-9291. The conference pass code is 72659894. The call will be broadcast live over the internet and can be accessed at http://webcast.mzdp.com.br/publico.aspx?codplataforma=1828 . The webcast will be available for replay in the IR section of the Company's website at http://www.chinaxd.net for 90 days.
About China XD Plastics Company Ltd.
China XD Plastics Company Ltd., through its wholly owned subsidiary Harbin Xinda Macromolecule Material ("Xinda"), develops, manufactures, and distributes modified plastics, primarily for automotive applications. The Company's specialized plastics are used in the exterior and interior trim and in the functional components of more than 30 automobile brands manufactured in China including Audi, Red Flag, Volkswagen and Mazda. The Company's wholly- owned research institute is dedicated to the research and development of modified plastics, and benefits from the cooperation with well-known scientists from prestigious universities in China. As of the end of December 31, 2010, 145 products that Xinda manufactured 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 ability to raise additional capital to finance the Company's activities; the effectiveness, profitability, and the marketability of its products; legal and regulatory risks associated with the share exchange; the Company's ability to successfully expand its production capacity; the future trading of the common stock of the Company; the Company's ability to operate as a public Company; the period of time for which its current liquidity will enable the Company to fund its operations; the Company's ability to protect its proprietary information; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; 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 . These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. 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, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
-- Financial Tables Follow --
CHINA XD PLASTICS COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME
(UNAUDITED)
For the Three Months Ended March 31,
2010 2009
Sales $50,036,431 $26,391,889
Cost of sales (38,139,725) (20,635,575)
Gross profit 11,896,706 5,756,314
Operating expenses
Research and development expenses 1,505,172 289,155
Selling expenses 91,379 45,651
General and administrative expenses 1,901,006 1,045,929
Total operating expenses 3,497,557 1,380,735
Operating income 8,399,149 4,375,579
Other income (expenses)
Interest income (expenses) (406,039) (355,606)
Other income 6,561 --
Other expense (16,237) (644)
Changes in fair value of warrants
and embedded derivatives 5,121,654 --
Total other income (expense) 4,705,939 (356,250)
Income before income taxes 13,105,088 4,019,329
Provision for income taxes (22,732) (2,685)
Net income $13,082,356 $4,016,644
Other comprehensive income (loss)
Foreign currency
translation adjustment 17,645 (37,617)
Comprehensive income $13,100,001 $3,979,027
Net income $13,082,356 $4,016,644
Dividend to Series C
preferred stockholders $(2,560,916) $--
Net income attributable to
common shareholders 10,521,440 4,016,644
Basic and diluted earnings
per common share
Basic $0.26 $4.98
Diluted $0.25 $0.10
Weighted average common share
outstanding
Basic 41,178,249 805,802
Diluted 41,612,074 38,999,874
Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
GAAP results for the three months and full year ended December 31, 2010 include non-cash charges. To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of those items in this release. The Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
Three Months Ended March
31,
2010 2009
Adjusted Net Income - Non GAAP 6,145,180 4,016,644
Change in fair value of warrants
and derivative liabilities (5,121,654)
Non-Cash Stock-based compensation 745,394
Option Arrangement Between Shareholders
Dividends (series C preferred stock) (2,560,916)
Net Income - GAAP 13,082,356 4,016,644
Weighted average number of
shares outstanding:
Basic 41,178,249 805,802
Diluted 41,612,074 38,999,874
EPS:
Basic 0.15 4.98
Diluted 0.15 0.10
Reconciliation of Net Income to Adjusted EBITDA
Adjusted EBITDA is a financial measure that is not defined by US GAAP. Adjusted EBITDA was derived by calculating earnings before interest, taxes, depreciation, stock-based compensation and amortization. The Company's management believes that the presentation of Adjusted EBITDA provides useful information regarding China XD Plastics' results of operations because it assists in analyzing and benchmarking the performance and value of China XD Plastics' business. The Company's calculation of Adjusted EBITDA may not be consistent with similarly titled measures of other companies. The table below provides a reconciliation of EBITDA to net income, the most comparable GAAP measure.
CHINA XD PLASTICS COMPANY LIMITED
Reconciliation of Net Income to EBITDA
(Amounts expressed in United States dollars)
Three Months Ended
March 31,
2010 2009
Net Income $13,082,356 $4,016,644
Interest Expense $406,039 $355,606
Provision for Income Taxes $22,732 2,685
Stock-based compensation 745,394 --
Option arrangement between
shareholders -- --
Change in fair value of warrants and
derivative liabilities $(5,121,654) --
Depreciation and amortization $830,162 $445,890
EBITDA $9,965,029 $4,820,825
CHINA XD PLASTICS COMPANY LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2010 2009
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $5,128,234 $6,850,784
Restricted cash 8,790,075 -
Notes receivable 449,747 407,487
Accounts receivable - net of
allowance for doubtful
receivables of
$166,123 and $166,095,
respectively 14,218,223 8,558,172
Prepaid expenses and other
receivables 238,083 253,172
Inventories 21,713,157 18,371,485
Due from related parties -- --
Advances to employees 541,558 512,745
Advances to suppliers 20,308,122 20,245,861
Taxes receivable -- 406,755
Total current assets 71,387,199 55,606,461
Property, plant and equipment, net 30,253,614 31,083,389
Other assets:
Intangible assets, net 240,592 241,945
Total assets $101,881,405 $86,931,795
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term loans $21,242,682 $21,678,565
Bank acceptance notes payable 5,860,050 --
Accounts payable 4,509,532 1,258,459
Other payables 342,241 714,504
Accrued expenses 306,797 648,358
Taxes payable 19,912 4,134
Due to an employee --
Due to related parties 100,394 148,397
Deferred revenue 174,641 300,296
Dividends payable 983,250 77,396
Total current liabilities 33,539,499 24,830,109
Other liabilities
Common stock warrant purchase
liabilities 6,183,046 7,892,513
Embedded conversion feature
liabilities 712,915 18,798,059
Total other liabilities 6,895,961 26,690,572
Total liabilities 40,435,460 51,520,681
Series C convertible redeemable
preferred stock: 752 and 15,188
shares issued and outstanding
as of March 31, 2010 and
December 31, 2009, respectively 687,821 13,891,477
Commitments and contingencies
Stockholders' equity
Series B Preferred Stock,
$0.0001 par value, 50,000,000
shares authorized,
1,000,000 shares issued
and outstanding as of
March 31, 2010 and
December 31, 2009 100 100
Common Stock, $0.0001 par
value, 500,000,000 shares
authorized, 44,007,589 and
40,867,050 shares issued
and outstanding as of March
31, 2010 and December 31,
2009, respectively 4,401 4,087
Additional paid-in-capital 43,982,642 15,360,949
Retained earnings 12,759,456 2,160,621
Statutory surplus reserve fund 2,471,007 2,471,007
Accumulated other
comprehensive income 1,540,518 1,522,873
Total stockholders' equity 60,758,124 21,519,637
Total liabilities and stockholders'
equity $101,881,405 $86,931,795
CHINA XD PLASTICS COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months ended
March 31,
2010 2009
Cash flows from operating activities
Net income $13,082,356 $4,016,644
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation and
amortization 830,162 445,890
Stock-based compensation
expense 745,394 --
Change in fair value of
warrants and derivative
liabilities (5,121,654) --
Allowance for doubtful
receivables 28 --
Loss on disposals of
property, plant and
equipment 14,836 --
Changes in assets and
liabilities:
(Increase)decrease in -
Restricted cash (8,788,043) (702,135)
Notes receivables (42,183) 251,150
Accounts receivable and
other receivables (5,657,496) 5,352,875
Prepaid expenses 106,643 --
Inventories (3,337,831) (3,130,573)
Advances to employees (120,090) (125,875)
Advances to suppliers (58,867) 2,743,624
Taxes receivable 406,729 --
Deferred charge -- (68,873)
Increase (decrease) in -
Accounts payable and
other payables 2,877,856 277,662
Due to an employee
Accrued expenses (341,577) (423,476)
Taxes payable 15,774 114,212
Deferred revenue (125,675) (3,183,553)
Net cash provided by (used in)
operating activities (5,513,638) 5,567,572
Cash flows from investing activities
Purchase of property,
plant and equipment (24,561) (29,175)
Proceeds from sales of
property, plant and
equipment 15,722 --
Repayment to related
party -- (10,616)
Net cash used in investing
activities (8,839) (39,791)
Cash flows from financing activities
Dividends paid (1,577,666) --
Repayment of short term
loans (439,402) (2,194,173)
Proceeds from bank
acceptance notes 5,858,695 1,755,338
Repayment of bank
acceptance notes
payable --
Repayment of related
party loans (142,722) (7,098,504)
Proceeds from related
party loan 100,394 --
Net cash provided by (used in)
financing activities 3,799,299 (7,537,339)
Effect of exchange rate changes on
cash and cash equivalents 628 (6,945)
Net decrease in cash and cash
equivalents (1,722,550) (2,016,503)
Cash and cash equivalents, beginning
of period 6,850,784 3,869,035
Cash and cash equivalents, end of
period $5,128,234 $1,852,532
Supplemental disclosures of cash
flow information:
Interest paid $387,372 $356,188
Income taxes paid $66,227 $8,864
Non-cash investing and financing
activities:
Embedded conversion feature
reclassified to equity upon
conversion $14,672,957 --
Preferred stock converted to
common stock $13,203,656 --
For more information, please contact:
China XD Plastics Company Ltd.
Mr. Taylor Zhang, Chief Financial Officer
Phone: +1-212-747-1118 (New York)
Mr. Allan Lao, IR Director
Phone: +86-451-84346600 (China)
Email: [email protected]
Web: http://www.chinaxd.net
CCG Investor Relations
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Mr. Ed Job, CFA
Phone: +86-138-1699-7314 (Shanghai)
Email: [email protected]
Web: http://www.ccgirasia.com
SOURCE China XD Plastics Company Ltd.
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